Nike is trying to regain its place in the sportswear industry. So far, Wall Street still isn’t buying it.
During an energetic World Cup, Nike recruited stars like Kylian Mbappé and Kim Kardashian, for its “Rip the Script,” World Cup ad, amassing three billion views. Then in August, the athletics wear company custom outfits for the U.S Open biggest stars.
Yet, Nike’s stock has plummeted, closing Friday at $35.75. The multiyear decline has wiped out $200 billion in market capitalization. The company was booted from the S&P 100 as a result.
Nike claims a turnaround is underway, but CEO Elliott Hill admits it’ll “take a while.” Wall Street thinks it might be years away.
“Hill is trying to spur product innovation, focus on sport, repair relationships with wholesale partners, and return to the culture at Nike that drove success,” said Cristina Fernandez, analyst at Telsey Advisory Group. “But it is taking time and competition is intense with several brands that have taken share in recent years including On, Hoka, New Balance, Anta and LiNing.”
During the COVID-19 pandemic, the Oregon-based company’s success was driven largely by an athleisure boom. Consumers, armed with stimulus checks and other liquidity while also shopping online, fueled discretionary spending. Internationally, strong growth in the China market added to Nike’s success. The company hit $6.05 billion in net income in its 2022 fiscal year, a record high.
Following its profitability with online sales during the pandemic, Nike shifted to a direct-to-consumer (DTC) strategy that pulled Nike products from wholesale partners like Foot Locker. Under CEO John Donahoe, Nike aggressively ended 50% of its partnerships to drive more sales on their online platforms.
The move failed as Nike lost physical shelf space and visibility with its consumers, leaving space for emerging competitors like On and Hoka to enter the market. Soccer star Kylian Mbappe ended his long-term partnership with Nike to sign with On this month. Deckers, the brand that owns Hoka, grew 29% to $78.67 over the last five years.
“I never thought I’d see this happen to Nike,” said Will Allen, founder and financial Advisor at Sentara Capital. “I grew up in the 80s and 90s and back then everything they touched turned gold. It almost seemed like every move they made was the right move.”
As Nike tries to win back its clients, consumers, squeezed by higher costs, are turning to cheaper alternatives in the retail sector like Ross and TJX, which owns TJ Maxx. Discount retailers have performed well over the last year as a result of high inflation and living costs. Ross grew 31% YTD to $236.12, with its total sales rising 13% to approximately $6.3 billion. Previously, the company peaked at $155.21 in Sept 2024.
“They know what works,” said Allen. “And their target customer has been growing, meaning they’re able to lock in some lower income consumers, but there are also higher income consumers who are also coming in there.”
Nike’s influence in China, which generated $8.29 billion in sales at its 2021 peak, has also fallen 30% due to increased local competition. ‘China Chic,’ a new cultural movement shifted consumer favor from Western brands to more traditional Chinese styles and brands. Once Nike’s top-growing region, sales in China continue to slow Nike’s turnaround.
Facing competitors like On, currently valued at 10 billion, coupled with declining demand, Nike’s stock has plummeted to a 12-year low. As stocks trade at $36 per share compared to $177 in its peak, few analysts advise investing in the stock.
“There was a time we owned Nike for our accounts, but not anymore,” said Allen. “We need to see that they’re turning around.”
Some investors see the stock as “on sale,” with potential to be profitable again. One Substacker posted on Sept. 17, “$NKE reports on Oct 1. I will be a buyer at or under $30.” The Substacker, a 47-year-old woman based in Ohio, explained the low price appeals to her as a “generational opportunity.”
“I think there are better opportunities out there,” she said. “But I am willing to give this a shot, and I will hope that the powers that be will right Nike in the meantime.”
Nike’s next earnings call for the first quarter of its fiscal year 2027 is scheduled for Oct. 1. If the stock has a chance of changing its trajectory, analysts want to see Nike outline a clear path towards profitability.