By Jack Hough
Nike's turnaround effort hasn't been a quick pivot, to borrow a basketball term. More like a wobbly slide on a dusty gym floor. The stock price peaked at over $170 in late 2021. It was down to $79 in October 2024, when company lifer Elliott Hill returned from retirement to take over and set things right. Now it's $46, a price investors could have paid nearly a dozen years ago.
There are two more problems. First, although shares are cheaper than they were, they aren't trading at a deep and obvious discount, at 24 times projected earnings for the company's fiscal year ending May 2027. A bounceback in earnings would help, but estimates for the years ahead have been slipping.
Second, Hill is already doing the things that investors are demanding -- refocusing the company on performance shoes after years of shuffling along on casual designs, and repairing relationships with stores after an arrogant move online. There are pockets of success, like a modest rebound in North American sales in the latest quarter. But it hasn't been enough.
It is a tempting buy when one of history's great growth stocks has fallen so much. A 3.6% dividend is a sweetener. But investors should first consider the possibility that Nike's problems run deeper than they appear.
A plunge in demand from China is clearly a key concern, but there are also questions over whether Nike has lost its marketing edge, amid what might be a shift in the phenomenon that brought it to dominance to begin with: basketball stardom. It may be wise to wait for more progress before buying shares.
Shoe Drop
An investor who held Nike from the start would have no regrets. Shares sold for 18 cents apiece, split-adjusted, at the initial public offering in 1980. But the price had dropped to 12 cents by Oct. 26, 1984. That was the day Nike gambled a then-unheard of $2.5 million on a five-year shoe deal with a college basketball star who hadn't yet played a day in the pros, Michael Jordan. The pact was so transformative that Ben Afleck made a 2023 movie about the executive who landed it, called Air, starring Matt Damon.
It isn't just that Jordan won six championships with the Chicago Bulls in the 1990s, or thrilled fans with soaring dunks. The '90s were the twilight of monoculture, when consumers watched the same television shows and read the same magazines, before the internet splintered audiences.
The 1992 Olympic "Dream Team" showed Jordan off to an adoring world. In marketing, there is a proprietary measure of celebrity reach and popularity called the Q Score. Anything over 20 is excellent, and 40 is a rare pop miracle. In the '90s, Pope John Paul II, a celebrity pontiff if ever there was one, is said to have scored in the low- to mid-40s. Jordan hit 56 -- everyone knew him, and everyone liked him. He made Nike the place to be for top athletes.
In Nike's fiscal year ended May 2025, its Jordan brand did $7.3 billion in sales, or 15% of the company's total. But that dollar figure was down a painful 16% from the year before.
For years, the brand generated hype through limited releases and instant sellouts of retro shoes, which "sneakerheads" traded on secondary markets. During the pandemic, Nike flooded the market, creating an easy boost for sales and profits, but also suffocating its hard-won hype.
Two disastrous things happened around the same time. Nike's Consumer Direct Acceleration strategy under previous CEO John Donahoe involved cutting ties with middling shoe retailers and reducing allocations to longtime partner Foot Locker, while pitching more shoes online for a higher cut of profits. Meanwhile, consumer preference abruptly shifted away from bulky basketball silhouettes toward running aesthetics, especially dad shoes and tech wear. New Balance, Hoka, and On surged, and stores that had been spurned by Nike were happy to give them shelf space.
The Skeptic
If there's a measure beyond Nike's stock price that captures its slump, it might be operating margin, which averaged around 13% over the decade through May 2024, and is projected to dip below 6% for the one through May 2026.
Part of the decline is necessary medicine. CEO Hill has pulled back on Jordan retro models, along with an oversaturated basketball low top turned lifestyle shoe called Dunks. And he is making amends with retailers, which has involved accepting humbler economics. The bull case on Nike -- less than half of Wall Street analysts say to buy the stock today, versus more than three-quarters at its 2021 peak -- is that margins will revert to normal once Nike regains its footing.
Jay Sole at UBS isn't so sure. For one thing, double-digit margins for sneaker giants are unusual. Adidas had an 8% margin last year, and it led Puma and Under Armour. Also, it's unclear how much Nike needs to shrink to grow. Sportswear, including apparel, has recently been half of sales, Sole reckons, even though the company once said it should never be more than 30%. This risks spending down brand equity that was built with performance shoes, and cultivating a customer base of trend chasers, not brand loyalists.
Stepping back, Sole wonders whether Nike has lost what he calls its superpower -- the ability to be all things to all people. "Most brands have some sort of limitation," he says. "They're footwear only or they're apparel only, or they're one country only, or they're one sport only, because that's sort of what they're known as. And it's hard to be more than that." Lululemon Athletica, for example, attracts primarily women, and Under Armour, men. In past UBS surveys that asked respondents which brands are for them, most topped out at 60%, but Nike hit 95%. It sells to men, women, young, old, suburban, urban, and participants in just about every sport, or no sports.
Today, insurgent brands have carved out niches. Nike's move back to retail has skewed toward lower-price channels. And something important has changed in basketball. LeBron James is a household name, but he's also 41 -- unheard of for an active pro. Where is the next Jordan? Today's greatest stars don't seem to transcend basketball, or scream sneaker sales.
Pro basketball's most valuable player of the past two years, Canadian Shai Gilgeous-Alexander, is a midrange sniper, but he might be best known for drawing foul calls -- and sometimes, chants of "flopper" from the crowd. Serbian big man Nikola Jokic stuffs the stat sheet, but also has a dad bod and lumbering gait, and displays so little emotion that fans joke about him showing up each season like it's a factory job, when he'd really rather be back home tending to his horses. France's Victor Wembanyama is young, likable, and so skilled that his nickname is "the Alien," but that's also because he's 7 feet 4 inches tall, a height that makes "I want to be like Wemby" not ring the same as when kids used to say it about "Mike," as in 6-foot-6 Jordan. Rookie of the year Cooper Flagg is 6-foot-8, more relatable on an NBA-adjusted scale, and a niche marketer's dream. He's a New Balance man.
The Believer
"They are taking the right steps," says Christopher Rossbach, chief investment officer at bottom-up asset manager J. Stern, of Nike's turnaround efforts. "In the U.S., it's starting to work." Last quarter, to his point, inventory fell. North American sales increased 3% as growth in footwear offset declines in apparel and equipment. There is still more investment in innovation needed after a pandemic lull, says Rossbach, a member of the Barron's Roundtable. But what's mainly holding the company back now are overseas sales, especially in Greater China, down 7% in the latest quarter, after a 17% drop during the same quarter a year ago.
Rossbach views the stock's decline as an overreaction, even though an inventory overhang in China suggests more difficulty ahead. What is mainly needed there, he says, is the same thing that is needed everywhere: fresher products. Tariffs have hurt, but Rossbach isn't concerned that trade tensions have turned China's consumers against an iconic American footwear brand. "I think these problems are absolutely fixable," he says. "There's no indication that there's a backlash against U.S. brands."
Beyond Nike's turnaround steps, Rossbach points to its cost-cutting -- Nike has completed a $2 billion savings program over the past three years -- and two catalysts: the recent passing of one year since a big ramp up in tariffs, which should make future comparisons easier, and the U.S. World Cup of soccer in June, hosted across North America, which could spur sales.
The Sneakerheads
"I'm just a guy that grew up a fan of Michael Jordan," says YouTube sneaker reviewer Sean Go. "Air Jordans were the way for me to connect with my favorite athlete of all time." Asked why he thinks Nike is struggling, he points to the recently launched Air Jordan 40, which marks the 40th anniversary of the brand, and was designed as a performance sports shoe with a casual fashion look. It's $205, and not a runaway hit so far.
"Michael Jordan has been retired for so long," says Go. Kids don't relate. And Go's friends that are buying shoes for performance are choosing other brands -- his runner friends like Wolverine World Wide's Saucony, Decker Outdoor's Hoka, Asics, and New Balance. In basketball, he points to Adidas' recent success selling shoes around pro star Anthony Edwards -- he's 6 foot 4 inches, and dunks like he's playing a kid brother on a Fisher-Price hoop. Go also highlights the rise of Chinese shoes, not just in China or for nationalistic reasons, but around the world, for their quality. "They're just really good shoes to wear on the court."
Chris Chase concurs. A lead reviewer for the WearTesters YouTube channel, he first got into sneakers through Nike Air -- not a single shoe, but rather a technology involving a pressurized nitrogen pouch embedded in soles. "I was probably in middle school at the time, and it took me a long time to go from Payless to getting Nikes," he says. "I had to convince my mom to spend that money because she was not interested."
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May 28, 2026 02:30 ET (06:30 GMT)
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