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Nike (NKE), the leading sportswear company, is in troubled waters. Its stock set a new 52-week low of $52.28 on Thursday, April 10. This decline reflects broader challenges the company has faced in recent years. Internal missteps, slowing sales, and now, fresh concerns over tariffs have weighed heavily on the stock.
While this decline has lowered its valuation, let’s explore whether NKE stock’s valuation is attractive enough to justify a buy and whether a rebound is in the offing.
The Roots of the Nike Stock Decline
At the core of Nike’s struggles are a combination of lackluster product innovation and strategic missteps. Traffic across its direct-to-consumer channels has softened, and the company has leaned increasingly on promotions to move merchandise. The overuse of discounts hasn’t just diluted Nike's perceived brand value, but also strained relationships with wholesale partners.
Meanwhile, competition remains strong in the sportswear segment. Upstart brands like On Holdings (ONON) and Hoka (DECK) have gained share. Adding to the challenges, Nike’s once-solid footing in China has also slipped, with sales slowing in what was once a key growth market.
Strategic Reset in Progress
To counter these headwinds, Nike has launched a multi-year restructuring effort. This includes scaling back older, legacy footwear lines and placing a sharper focus on fresh, innovative products. The company plans to re-energize its brand engagement, enhance product storytelling, and deliver a portfolio more aligned with consumer preferences. These changes are expected to play out gradually through fiscal 2026.
Nike is also adjusting its digital strategy to reduce reliance on markdowns and move excess stock to outlet channels like Nike Factory Stores. Although this may temporarily dampen digital traffic, the ultimate goal is to shift toward a more sustainable model built around full-price sales and stronger brand value.
External Pressures Complicate Nike’s Turnaround
However, just as Nike works to stabilize its operations, geopolitical issues are throwing new challenges into the mix. President Donald Trump’s trade policies threaten to impact Nike’s bottom line significantly.
With nearly all of its footwear and apparel manufactured outside the U.S. — primarily in Vietnam, Indonesia, and China — Nike is especially vulnerable to trade disruptions.
To put this in perspective, around 50% of Nike’s footwear production in fiscal 2024 came from Vietnam, with Indonesia and China contributing 27% and 18%, respectively. On the apparel side, Vietnam, China, and Cambodia accounted for 28%, 16%, and 15%, respectively. Tariffs on these countries could meaningfully increase costs and further pressure margins.
Although the U.S. has paused higher “reciprocal” tariffs for 90 days on countries including Vietnam and Indonesia, leaving a new baseline 10% tariff, China faces import tariffs of 145%. This has added uncertainty for companies like Nike.
Beyond the financial impact, there’s also a branding risk. If an anti-American sentiment emerges, particularly in China, a market that generated $5.11 billion of Nike’s $35.12 billion in sales in nine months of FY25, it could dampen demand further.
Nike’s Financial Struggles Are Evident
Financially, the signs of distress are already evident in Nike’s performance.
In the third quarter of FY25, Nike reported a 9.3% decline in revenue. Management highlighted that sales dropped sharply in January and February after a strong December holiday season. Nike Direct, its consumer-facing business, fell 10%, with Nike Digital plunging 15%. Even wholesale revenue slipped 4%, mainly due to weakness in China. Gross margins were hit hard, shrinking 330 basis points to 41.5% as a result of markdowns and inventory costs.
Nike anticipates that fourth-quarter revenue will fall in the mid-teens, with gross margins expected to decline by 400 to 500 basis points.
Is the Stock a Bargain?
Despite the gloomy near-term outlook, Wall Street remains cautiously optimistic. Nike stock currently holds a “Moderate Buy” consensus among analysts, reflecting a belief that its turnaround strategy may eventually pay off. However, confidence is tempered by significant uncertainties, led by tariff risks and stiff competition.
At a forward price-earnings ratio of 27.7x, Nike stock isn’t offering value considering its declining sales, shrinking margins, and expected drop in the bottom line. Thus, a recovery, if it comes, could take years — not quarters.
