By Jon Emont
American companies are flailing in China.
Earlier this week, Nike said revenue there was down by a double-digit percentage and poised to get worse. California clothing brand Guess just closed down all its stores in China. Starbucks last year agreed to sell a majority stake in its business to a Chinese company, Boyu Capital, after running into tough local competition.
A decade ago, American companies had pegged China as a top growth opportunity. The country of some 1.4 billion people was growing fast and its young people were intrigued by American brands and fashion. Former Starbucks Chief Executive Howard Schultz predicted in 2018 that China would become the company's largest market.
Instead, a bad situation has been getting worse in the past few months -- a development that has geopolitical implications with President Trump due in Beijing in mid-May. Fewer American companies feel like they have a stake in good relations between the two superpowers, which is pushing Washington and Beijing toward managing a messy divorce.
The poor performance of U.S. brands in China adds to other factors driving the two countries apart, including Trump's high tariffs on Chinese goods and each country's unwillingness to sell the other advanced technology with potential military uses.
U.S. companies trying to hang on to a piece of the Chinese market are running into innovative local brands in industries such as ice cream, lingerie and bicycles. A deteriorating property market has lessened the spending power of the middle class and encouraged people to look for bargains instead of foreign brands that charge a premium for cachet.
"It's getting more and more competitive [and] very difficult to commercially succeed now, unlike 20 years ago," said Eric Zheng, president of the American Chamber of Commerce in Shanghai.
In November, Burger King's owner, Restaurant Brands International, said a Chinese partner would buy more than 80% of Burger King China in a bid to reignite growth. "It became clear the situation needed to change," said RBI's executive chairman, J. Patrick Doyle, in February.
American auto brands have seen their share of the Chinese market drop by more than half over the past decade to 5% in 2025, according to GlobalData, after being out-innovated by local electric-vehicle makers such as BYD and Xiaomi.
Nike's announcement this week that it expected China revenue in the current quarter to fall 20% led its stock to fall more than 15% on Wednesday. After the U.S. sneaker maker helped create a Chinese culture of exercise, local rivals Anta and Li-Ning are grabbing the market it built.
Revenue earned in China by companies in the S&P 500 dropped to 7.1% of total revenue last year from 7.5% in 2024, according to FactSet.
The handful of American consumer brands in China that are still succeeding, such as Sam's Club and Crocs, have adapted their products to local tastes. Crocs has embraced quirky marketing from teams based in China.
U.S. companies are finding that Chinese consumers are less captivated by American cultural trends and more often take pride in local brands.
Olivia Plotnick, who runs a China-based marketing agency, said U.S. companies need to invest more in their brands to connect with Chinese consumers. "Before the pandemic you could get away with, you know, a photograph of Chinese models, or celebrities, or maybe a Chinese New Year edition kind of drop," she said.
A decade ago, executives at Guess saw great potential in China, quickly expanding to more than 150 stores around the country. The company had success with signature products such as figure-hugging jeans and T-shirts. It embraced China's TMall e-commerce platform, owned by Alibaba, despite the heavy discounting needed to sell in large volumes.
The company knew it couldn't just do things in China the way it did them in the West, said Jose Blanco, who led the company's China business from 2015 to 2021. Guess turned away from purses, because of the highly competitive market for leather goods in China.
Around 2019, the company tried to shift toward the premium range and improve margins, but it wasn't supported by the right marketing in China, said Blanco.
In this decade, with the economy in the doldrums, Chinese consumers have favored more demure styles and moved away from brands with loud logos and revealing American-style clothing.
"Guess was very like 'American sexy,'" said Plotnick. "That was a very specific style and I think that has gone out of style."
In late February, Guess said it would close its stores in China and its online platform. Guess said in text messages to Chinese customers that it "will continue to cultivate the Chinese market through a brand-new model in the future."
Private retail juggernaut Authentic Brands recently purchased a controlling stake in Guess. The plan to close China stores was in place before the acquisition.
Yolanda Zhang, a Shanghai-based tech worker in her 30s, said she wasn't surprised by the Guess news. "There are so many domestic brands in China now," she said. "If a brand lacks a unique style and a reasonable price, it simply cannot survive here."
Zhang went to a local mall and waited 30 minutes in line to buy a pair of Guess jeans for $20, at an 85% discount.
Write to Jon Emont at jonathan.emont@wsj.com
(END) Dow Jones Newswires
April 02, 2026 10:00 ET (14:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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