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Shares of athletic footwear, apparel, and equipment maker Nike (NKE) have eroded investors’ wealth over the short term and the longer term, as well. The stock has dropped roughly 24% year-to-date, significantly underperforming the S&P 500 Index ($SPX), which has posted a 20.5% gain over the same period.
Several factors have contributed to Nike's struggles. Heightened competition from emerging brands like Hoka and On Holdings (ONON) has pressured Nike’s market share. On top of that, broader economic challenges have dampened consumer demand, and Nike has also encountered difficulties in the key Chinese market.
Long-term investors have felt the sting, too. Over the past five years, Nike stock has lost about 12.6%, while the S&P 500 surged nearly 92%. This underperformance has raised questions about whether Nike is still a good investment.
Despite these setbacks, Nike is actively pursuing a turnaround strategy. The company is doubling down on innovation investments aimed at reigniting growth. This strategic shift underscores Nike’s commitment to adapting to market dynamics and reclaiming its competitive edge.
However, the key question for investors is: Should they hold onto Nike stock in hopes of a rebound? Let’s take a closer look.
Nike’s Turnaround Strategy
Nike is taking significant steps to turn its business around and regain its edge in the competitive sportswear industry. The company is undergoing leadership and organizational changes, and focusing on a multi-year innovation cycle to enhance its product lineup and drive growth.
By accelerating its innovation pipeline, Nike is pushing forward several initiatives, some of which were initially planned for later launch. The company aims to re-establish itself as a leader in fitness and lifestyle products, with a focus on exciting new franchises.
One of Nike's strategic decisions is to reduce its reliance on classic footwear franchises like Air Force 1, Air Jordan 1, and Dunk. Given this move, its revenue from these iconic products decelerated in the first quarter (Q1) of fiscal 2025, as the company tightened supply in the marketplace. While this move may temper short-term revenue, it is designed to create a more balanced product portfolio and pave the way for accelerated innovation across its lineup.
Nike is seeing early success in multiple sports categories, particularly in men’s fitness, global football, and running footwear for both men and women.
Management highlighted strong growth in its new footwear products, with Q1 revenue from this category showing double-digit gains compared to the previous year. Several new franchises have scaled rapidly, such as the performance-focused "Sabrina" line, which grew fivefold, while the "Kobe" and "Alphafly" lines also notched significant increases, nearly quadrupling and tripling, respectively.
Looking ahead, Nike is confident in its innovation pipeline, which will continue to evolve into Fall 2025. Moreover, the company said that partner feedback on its new product pipeline has been very positive, which bodes well for growth.
Adding to this optimism, Nike recently announced that former executive Elliott Hill will return as CEO. His leadership is expected to guide Nike through its next phase of growth.
The Risks: What Could Hold Nike Stock Back?
While Nike’s long-term prospects look promising, the near-term presents challenges. The company has experienced a drop in sales, especially in its direct-to-consumer and partner channels, with a notable decline in traffic in China. Ongoing supply chain issues, higher inventories, and competitive pressure from other brands mean that Nike may need to rely on heavy promotions to clear stock, which could further impact profit margins.
Nike has already warned that its Q2 revenue is expected to decline by 8-10%, with a 150 basis point-drop in gross margins. Competition in the multi-brand retail space is also intensifying, making it harder for Nike to gain market share quickly.
Should You Hold Nike Stock?
Nike's long-term strategy to regain its competitive edge through innovation and leadership changes offers hope for growth. However, the near-term challenges, including economic uncertainty, intensified competition, and a flat order book for Spring 2025, suggest that Nike may take some time to recover fully.
For long-term investors, Nike’s strong brand, innovative push, and leadership changes could make the stock worth holding. However, for those seeking quicker gains or more immediate returns, Nike's stock might not deliver in the short run.
Currently, analysts have a “Moderate Buy” consensus rating for Nike, with an average price target of $89.21, which indicates limited upside in the near term.
The Bottom Line on NKE Stock
Nike is making the right moves to spark growth, but the path forward won’t be without bumps. Investors with a long-term perspective might choose to hold steady, while others may want to consider exploring alternative investments with stronger short-term growth potential.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
