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Economy

Nike’s China Challenges: Can LeBron James and New Strategies Revive Sales Amid Tariff Headwinds?

Nike beat Q1 expectations, but faces China challenges & tariffs. Recovery is slow, led by North America.

byAndres Castro

September 30, 2025, 11:39 PM

Executive Summary

Nike exceeded first-quarter revenue and profit expectations, signaling early traction for its turnaround strategy through reduced inventory and a return to wholesale growth.

The company faces significant headwinds from escalating tariff costs, now projected at $1.5 billion due to President Trump’s duties, and a fifth consecutive quarter of declining sales in its crucial China market.

Despite initial progress, Nike anticipates a prolonged path to full recovery, forecasting continued direct-to-consumer weakness and a slower recovery in China compared to other regions.

The Story So Far

Nike’s financial performance and ongoing turnaround efforts are significantly impacted by increased tariff costs, projected at $1.5 billion this year, stemming from duties imposed by President Donald Trump on goods from key manufacturing locations like Vietnam. Simultaneously, the company faces persistent challenges in its crucial China market, which has seen declining sales for five consecutive quarters due to fierce competition from domestic and newer brands, necessitating a strategic focus on core sports and product innovation to reignite demand and address these multifaceted headwinds.

Why This Matters

Despite Nike’s unexpected first-quarter revenue and profit growth signaling early success for its turnaround strategy, the company faces significant headwinds, including a projected $1.5 billion in increased tariff costs imposed under President Trump and persistent sales declines in its crucial China market, indicating a prolonged path to full recovery.

Who Thinks What?

Nike’s leadership, including CEO Elliott Hill and finance boss Matthew Friend, indicated early traction for their turnaround strategy, evidenced by exceeding first-quarter revenue and profit expectations and a return to wholesale growth, but cautioned that a full recovery remains distant due to persistent challenges in China and increased tariff costs.

David Bartosiak, a stock strategist at Zacks Investment Research, noted that while Nike “beat the low bar” and showed “wholesale strength,” he believes the underlying fundamentals remain “shaky” due to direct-to-consumer weakness, margin pressure, and continued softness in China.

Nike unexpectedly reported a rise in first-quarter revenue and surpassed profit expectations on Tuesday, signaling early traction for its turnaround strategy despite persistent challenges in China and increased tariff costs imposed under President Donald Trump. The sportswear giant’s shares rose as it managed to reduce bloated inventory and saw a return to growth in wholesale revenues for the quarter ending August 31.

Turnaround Efforts and Financial Performance

CEO Elliott Hill, who took the helm last year, has focused on refocusing the brand on core sports like running and developing innovative products. While the company cleared some inventory, executives cautioned that a full recovery remains distant amid a cautious consumer environment and ongoing tariff uncertainties.

Nike’s first-quarter revenue increased 1% to $11.72 billion, exceeding analyst estimates of an $11 billion decline. Earnings per share significantly beat expectations, coming in at 49 cents against a forecast of 27 cents.

Impact of Tariffs and China Market Challenges

The company now anticipates tariffs to cost approximately $1.5 billion this year, an increase from its earlier projection of $1 billion. This pressure on margins stems from President Trump’s duties on goods from countries like Vietnam, where Nike manufactures most of its footwear.

China, Nike’s third-largest market and accounting for 15% of fiscal 2025 sales, continues to be a significant hurdle, with sales declining for the fifth consecutive quarter. The company faces fierce competition from domestic brands such as Anta and Li-Ning, as well as newer rivals like On and Deckers’ Hoka.

To address the slump, CEO Hill mentioned efforts like sending U.S. basketball stars LeBron James and Ja Morant to China as ambassadors, hoping to leverage sports like running and basketball to reignite demand in the region. However, executives indicated that a recovery in China would take longer than other markets.

Outlook and Analyst Perspective

Looking ahead, Nike forecasts a low-single-digit decline in second-quarter revenue. While the struggling wholesale business is projected to achieve growth in fiscal year 2026, the company’s finance boss Matthew Friend stated that the direct-to-consumer business is not expected to return to growth in the same period, with North America leading recovery and China lagging.

David Bartosiak, a stock strategist at Zacks Investment Research, noted that while Nike “beat the low bar set for EPS and showed some wholesale strength,” underlying fundamentals remain “shaky,” pointing to direct-to-consumer weakness, margin pressure, and China softness as “flashing yellow lights.”

Key Takeaways

Despite exceeding first-quarter revenue and profit forecasts, Nike faces continued headwinds, particularly in its crucial China market and from escalating tariff costs. The company’s turnaround efforts show initial signs of progress, but executives acknowledge a prolonged path to full recovery, underscoring the complexities of navigating global market dynamics and geopolitical trade policies.