Nike ($NKE) Analysis
Nike saw a glimpse of hope in recent months after the company’s earnings report in late June, but the stock’s upside momentum is fading again as the realities of the economy and fierce competition weighs it down. The company’s revenue has declined between 8-12% every quarter for the past twelve months, and net income has faced even more pressure, dropping as much as 86% in its most recent report.
The company’s struggles come from a mix of reasons. Sluggish consumer demand and discretionary item spending is a leading cause, and their own decisions to cut out wholesale partners also coincided with the rise of competitors like On and Hoka, who gladly filled the shelves Nike left behind. Digital sales, once a major growth driver, are also slumping as Nike miscalculated consumer appetite and leaned too heavily on discounting to move excess inventory. This not only hurt margins but also diluted the brand’s premium perception.
Adding to the pressure are global headwinds. China, once Nike’s growth engine, has turned into a drag with double-digit sales declines, while tariffs are set to add billions in costs over the next year. Meanwhile, rivals such as Adidas, Lululemon, and newer niche players are finding ways to resonate with consumers through innovation, community, and better wholesale relationships.
Nike is now in the middle of a strategic reset under its new leadership, with a renewed focus on performance categories like running, basketball, and training, while also rebuilding partnerships with retailers it once sidelined. The turnaround is underway, but it will take time to repair lost ground, especially as competitors capitalize on the very gaps Nike created.
At a $103 billion valuation, Nike is steep compared to $ONON at $14.5B and $DECK (the parent company of Hoka and UGGs) at $16B. Yes, Nike generates far more revenue than both On and Deck combined, but the two other companies are posting strong double digit revenue growth while Nike does the opposite, perhaps why it is far underperforming. Nike’s most recent earnings didn’t built enough confidence for investors to jump back into the stock, and any signal of recession or further tariff costs will likely hinder its recovery.
It’s understandable why Nike is an attractive buy at these lows, but investors shouldn’t let brand appeal form their investment decisions. The business as a whole is still struggling and facing uncertainty. We want to see a turnaround in the numbers for there to be a lasting turnaround in the stock.