TLDR:
- Nike stock is trading at its lowest valuation since 2013, at just below 2x sales
- Revenue is down 9% and profits dropped 28% in the first three quarters of fiscal 2025
- New CEO Elliott Hill, a 32-year Nike veteran who returned in October, is working on a turnaround
- Trump announced new tariffs of 46% on Vietnam, 32% on Indonesia, and 34% on China
- Nike shares fell 6% after the tariff announcement, as 95% of its manufactured goods come from these countries
Nike shares took a hit this week following President Trump’s announcement of steep tariffs on countries that produce the majority of the company’s footwear and apparel. The news comes at a particularly challenging time for the athletic wear giant, which has been struggling with declining sales and profits.
The company has already completed three quarters of its fiscal 2025. The results have not been encouraging for investors.
Revenue is down 9% compared to the same period in fiscal 2024. This decline has occurred despite an 8% increase in marketing expenses.
The combination of lower sales and higher costs has significantly impacted Nike’s bottom line. Net income has dropped 28% to $3 billion for the first three quarters of fiscal 2025.
Tariffs Add to Existing Challenges
The latest blow came when President Trump announced reciprocal tariffs of 46% on Vietnam, 32% on Indonesia, and 34% on China. Nike shares fell 6% following the news.
This is particularly problematic for Nike because 95% of its manufactured goods come from these three countries. Like most U.S. footwear companies, Nike has long depended on Asian factories for production.
In recent years, Nike had been strategically shifting production away from China to countries like Vietnam and Indonesia. This strategy has now been complicated by the new tariff structure.
Other footwear companies including Skechers, Deckers, and Crocs also saw their shares decline after the tariff announcement. The entire sector is grappling with these new trade challenges.
Technical Analysis
According to analyst Trader Edge, Nike experienced a significant decline following the tariff news, with price down nearly 70% from the 2021 highs. The stock is currently testing a key support level at $60, which corresponds to the COVID lows. Bulls do not want to see daily closes below this key level as it could potentially be turned into resistance. The next major support is coming in around $50.
Valuation at Decade-Low Levels
The market’s reaction to Nike’s troubles has pushed the stock to its lowest valuation in more than a decade. The company now trades at just under 2 times sales, a level not seen since 2013.
However, a low valuation alone doesn’t necessarily make Nike stock a buy. Studies by Boston Consulting Group suggest that factors like revenue growth, margins, and free cash flow typically have a greater impact on long-term stock performance than valuation.
For Nike to become an attractive investment again, it will need to demonstrate an ability to return to growth and rebuild profit margins. The company’s current operating margin of about 10% is well below its 10-year average of around 12%.
At Nike’s scale, this 2% margin difference represents approximately $1 billion in operating profit. A recovery in margins could provide a significant boost to the stock price.
New Leadership and Turnaround Efforts
Despite these challenges, Nike does have some factors working in its favor. The company maintains unparalleled brand recognition in the athletic apparel space.
With nearly $50 billion in annual revenue, business in nearly 200 countries, and high-profile endorsements from athletes like LeBron James, Nike’s brand presence remains formidable.
New CEO Elliott Hill may be another positive factor. Hill worked at Nike for 32 years before retiring in 2022, only to return as CEO in October 2024.
Hill has particular expertise with Nike’s Jordan brand. He has already reached out to key distribution partners to involve them in a multi-year product pipeline process, aiming to create mutually beneficial relationships.
The new CEO is also working to clear out old inventory to update the product lineup. While this is hurting margins in the short term, it could position the company for a stronger future.
However, Nike’s long-term growth prospects remain uncertain. As the market-share leader worldwide, there are natural limits to how much more of the market Nike can capture.
The athletic apparel space is mature and not growing rapidly. For a company of Nike’s size, achieving high growth rates is inherently challenging.
Less than half of Nike’s revenue came from North America in fiscal 2024. With increasing complexities in global trade throughout 2025, Nike’s international growth potential has become more difficult to predict.
Nike shares fell on the tariff news, closing at their lowest point in the past three years. The company faces significant challenges ahead as it navigates both internal restructuring and external trade pressures.
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