Things have been getting from bad to worse for Nike's (NKE) stock, and it recently fell to the lowest level in 12 years. Notably, NKE stock peaked in November 2021 but has been sliding since, closing in the red for four consecutive years. It is down around 36% this year, and unless something miraculously changes over the course of the year, it looks set to extend its losing streak to five years.
Nike stock is down almost 78% from its all-time highs, and in absolute terms it has lost almost $200 billion in market cap from the peak. The underperformance looks all the more frustrating considering the stellar returns the S&P 500 Index ($SPX) has delivered over the period. While the index closed in the red in 2022, it has given positive returns in every year since and is sitting on double-digit gains in 2026, despite all the noise over higher inflation, the feared interest rate hikes, and the volatile geopolitical situation in the Middle East.
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In my previous article, I noted that while Nike’s dividend yield was 3.8%, which was near its all-time highs, the stock wasn’t a buy yet. Thanks to the subsequent plunge in Nike’s stock, the dividend yield has shot above 4%. Let's dig into whether NKE stock is a bargain after the crash or whether investors are better off avoiding the sneaker giant.
www.barchart.com Why Has Nike Stock Been Falling
To begin, let’s examine the factors that have been weighing on NKE stock. Under the previous CEO, John Donahoe, who was replaced by Elliott Hill in October 2024, Nike shifted its focus away from wholesale sales and doubled down on direct sales through its own stores and online.
The company also cut ties with some retailers, and the strategy seemed to pay off initially, with Nike reporting strong growth in direct sales, especially online sales during the Covid-19 pandemic. However, the decision to cut down on wholesale sales backfired and only helped competitors gain shelf space and, by extension, a higher share of customer wallets. In hindsight, the company was perhaps a bit too optimistic about the pull of its brand while underestimating the strength of third-party retailers, including Amazon (AMZN), whose e-commerce platform it quit in 2019, citing concerns over the proliferation of fake goods.
Nike has been losing market share to rivals like Hoka, which is owned by Deckers (DECK), and Switzerland-based On Holding (ONON). The company was overreliant on its legacy portfolio while consumers pivoted to newer brands. Also, some of Nike’s new shoe releases did not receive the kind of reception that the company expected, and as a result, it was left with a lot of unsold inventory. Nike also faced backlash from conservatives for some of its marketing campaigns, which were seen as “woke.” Nike did no good to its brand image with the shoulder issues in its national team kits during the 2026 FIFA World Cup.
If the problems in the U.S. weren’t enough, Nike is battling some structural headwinds in China, and its sales in the Greater China region have fallen 30% since the 2021 peak. While sports goods as a category are doing quite well in China despite the overall softness in retail sales, Chinese consumers have increasingly been preferring domestic brands over U.S. rivals. It did not help that a previous statement about Nike being “concerned” about allegations of forced labor in China’s restive Xinjiang region resurfaced in 2021, which led to boycott calls. While other U.S. brands, particularly Apple (AAPL), have also faced such informal boycotts in the world's second-biggest economy, the iPhone maker has held its ground relatively well despite growing competition from Chinese brands like Huawei.
On the macro level, the tariff uncertainty in the U.S. and the challenges from the Iran conflict only add to Nike’s troubles.
Nike Is (Still) Attempting a Turnaround
Nike has since taken several measures to address these issues, and during the Q4 2026 earnings call, Hill discussed the need to be “more premium and culturally relevant” in China. The company is revamping its marketplace strategy in mainland China and plans to cut off thousands of online distributors from 2027 while concentrating on its own channels alongside Nike-branded digital storefronts on Douyin, JD.com (JD), and Alibaba's (BABA) Tmall.
Conversely, in the U.S., it has mended relations with third-party retailers and is back on Amazon. The company is also cutting down its bloated inventory while doubling down on innovation, something it slackened on for the previous few years.
It has taken several measures to lower costs, and the management is optimistic about expanding its gross margin from the current quarter even as it expects sales to fall in “low to mid-single digits” in the first half of the current fiscal year.
www.barchart.com However, there is no quick fix to Nike’s woes, and the turnaround under Hill is taking painfully long. The company faces the unenviable challenge of increasing sales and margins concurrently, as focusing on one of these invariably means compromising on the other. The macro environment continues to be unconducive for Nike, as there has been significant cost-push inflation amid the rise in energy prices. Moreover, there is pressure on discretionary spending amid the rise in gas prices, which remains a headwind for companies like Nike.
Meanwhile, we also need to look at the valuations, and Nike’s forward-price-to-earnings (P/E) multiple has fallen to around 23x. While that is still higher than Nike’s average S&P 500 Index peer, I believe the risk-reward has started to get favorable for Nike as we are now near peak pessimism.
The current fiscal year is crucial for Nike, though, and markets would scrutinize the progress in gross margin expansion and a potential sales rebound in the second half. Even commentary over sales returning to growth in the next fiscal year should help revive sentiment. All said, I believe NKE stock can be nibbled at these levels, even though I still don’t find it a real bargain.
On the date of publication, Mohit Oberoi had a position in: AMZN , BABA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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