Episode summary
Nike Sinks After China Sales Plunge, Delaying Turnaround | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Poonam Goyal, Lee Klaskow, Brian Egger, Mandeep Singh
Summary
Nike’s turnaround is being driven more by a US recovery than by China, where sales have “really plunged” and may not rebound until 2027. The guest said the brand problem in China is structural: Nike has been too promotional, lacks premium positioning there, and needs to rebuild product, marketing, and inventory discipline. She also said tariff pressure remains a margin headwind because footwear is largely imported from Vietnam, and selective price increases are only partly offsetting the impact.
FedEx’s quarter looked solid on the surface, but the analyst said the second half faces a roughly $600 million earnings headwind from higher compensation, weak less-than-truckload demand, and the grounding of its MD11 fleet. He said the restructuring is working, but the benefits may not show up meaningfully until 2027. He also noted FedEx Freight is set to be spun out in June next year, which could unlock value.
Carnival’s outlook was more upbeat: the analyst said the company expects about 2.5% revenue yield growth next year, helped by good cost control and only about 1% supply growth. The discussion also turned to the TikTok deal, where the analyst said the Oracle-led structure likely satisfies US concerns, but the app still faces a long rebuild around its algorithm, ad stack, and personalization.
Key takeaways
- Nike’s US business is improving, but the guest said China sales have plunged and may not recover until 2027.
- The guest said Nike’s China problem is brand-driven, with too much discounting and weak premium positioning.
- Tariffs remain a margin drag for Nike, with footwear production concentrated in Vietnam and a 20% tariff exposure.
- FedEx faces about a $600 million second-half earnings headwind, according to the analyst, from compensation, LTL weakness, and MD11 grounding.
- Carnival sounded constructive, with the analyst expecting about 2.5% revenue yield growth next year and only about 1% supply growth.
- The TikTok-Oracle transaction was described as likely workable, but the analyst said rebuilding the algorithm and ad stack could take time.
Notable quotes
“The issue is outside of the United States in China specifically where sales have really plunged and we don't think that they can you know quickly rebound those sales anytime soon”
“I think the biggest issue is brand specific. So unlike in the US, the Nike brand isn't perceived as a higherend athletic brand”
“it will have an impact on margins. In fact, Nike's gross margin, if you look at it, even what was recently reported, more than half of it was due to tariffs”
“they seem to be executing on their restructuring plan. The problem is is that in their second half, they're going to be having a lot of headwinds”
“I think overall the takeaway was fairly encouraging on that front”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.
Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. One of the big losers in today's session so far is Nike down 9 and a half% right now.
Um quite a bit going on there. So let's bring in Punam Goyal, the senior US e-commerce and retail analyst at Bloomberg Intelligence. Punam, Nike is in turnaround mode.
Uh Elliot Hill is no longer a new CEO. He's just the CEO because he's been there for about a year. How is his effort to turn this company around shaping up?
I think his efforts to turn US business is shaping up quite nicely. We are seeing momentum rebuild in the US. The issue is outside of the United States in China specifically where sales have really plunged and we don't think that they can you know quickly rebound those sales anytime soon.
It may be a 2027 story um to see any resurgence in China. If that
What is the issue uh in China? Is it their brand specific? Is it the Chinese consumer? What's going on there?
I think the biggest issue is brand specific. So unlike in the US, the Nike brand isn't perceived as a higherend athletic brand. In fact, it's sold way too much and off price and at discount.
So the brand needs to build brand momentum and brand heat. And yes, the Chinese consumer isn't particularly, you know, on its best feet right now. But if you compare what's happening in China and you look at Lulle Lemon, Lulle Lemon has had outstanding results in China, much smaller, but you know, they've been able to do really well there.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- nike china sales
- fedex turnaround
- carnival earnings and dividends
- tiktok oracle deal
- retail and logistics earnings
Companies and tickers mentioned
- NKE
- FDX
- CCL
- ORCL
- Nike
- FedEx
- Carnival
- TikTok
- Oracle
- ByteDance
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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