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(Sharecast News) - Nike shares fell sharply in after-hours trading on Thursday after the sportswear giant reported another weak quarter in China, deepening investor concerns over the pace and durability of its turnaround under chief executive Elliott Hill.
The company posted fiscal second-quarter revenue of $12.4bn for the three months ended 30 November, up 1% year on year and slightly ahead of market expectations.
Earnings per share came in at 53cents, above forecasts but down from 78cents a year earlier, while gross margin fell 300 basis points to 40.6%, reflecting higher tariffs and ongoing discounting to clear ageing inventory.
China remained the standout drag on performance.
Revenue in the Greater China region fell 17% to $1.4bn, with footwear sales dropping around 20%, marking a sixth consecutive quarterly decline.
Operating profit in the region also missed expectations by a wide margin, underscoring the scale of the challenge in what was once a key growth market accounting for roughly 15% of Nike's sales.
Hill acknowledged that Nike "needs a reset" in China, citing underinvestment in stores, declining foot traffic and a failure to keep pace with a highly competitive, discount-driven market.
The company said it was now refocusing on key cities such as Beijing and Shanghai, adjusting its product mix and attempting to better align with China's ecommerce landscape, though executives cautioned that progress would take time.
Beyond China, weakness at Converse added to investor unease, with sales at the brand plunging 30% in the quarter as it continues to rely heavily on its core Chuck Taylor franchise.
Nike warned that overall revenue was expected to decline by low single digits in the current quarter, reversing two consecutive periods of growth.
Despite pockets of improvement in North America and the running category, Hill described the recovery as being in the "middle innings" and stressed that it would not follow a straight line.
The company had reshuffled its senior leadership, cut back legacy lifestyle lines and was pushing designers to accelerate the development of more technically advanced, sport-focused products.
Shares fell close to 11% in extended New York trading following the results.
Reporting by Josh White for Sharecast.com.