China's 'two billion feet' are suddenly running from Nike

Nearly a half-century ago, Nike co-founder Phil Knight traveled through China on a slow train, with passengers stripped to their underwear in the summer heat, and dreamed of selling sneakers.

- Jon Emont & Inti Pacheco

Nike's China revenue over the past three quarters was 28% lower than in the same period five years ago.

(REUTERS)

He laid out an ambitious vision—“One billion people, two billion feet”—that called for an aggressive push into the country. By 2010, China was among Nike’s most lucrative markets, offering a blueprint for U.S. companies seeking to cash in on China’s rise.

Today, Nike’s China business is flailing—a cautionary tale of an American giant caught in the tar pit of China’s hypercompetitive and increasingly nationalistic consumer market.

Nike’s China revenue over the past three quarters was 28% lower than in the same period five years ago, even as the country’s sportswear market boomed. Nike has dumped its longtime China leadership, jettisoned other top employees and acknowledged “structural” challenges in the country, which is now the worst-performing part of its global operations.

Executives recently told investors that revenue in China and Taiwan could fall by about 20% year-over-year in the quarter ending May 31—a forecast that pushed Nike’s stock price to its lowest levels in more than a decade. The company subsequently said it would reduce its workforce by some 1,400 workers, or about 2%.

Nike is just one of many U.S. brands ailing in China. Weakness in China’s economy has weighed on spending, and many shoppers are losing interest in American products as tensions between the two countries rise. Many U.S. companies are struggling to compete in a country once considered essential to their futures.