NIKE Inc. NKE stock has witnessed a remarkable slowdown since the start of 2024, driven by operational challenges, highlighted by sluggish lifestyle segment sales, issues in Greater China and reduced digital sales. As a result, NKE has encountered a notable resistance level, prompting caution among investors from a technical standpoint.

Driven by these trends, the NKE stock is trading below its 50-day and 200-day simple moving averages (SMAs), indicating a bearish outlook and challenges in sustaining the recent performance levels.

The SMA is an essential tool in technical analysis that helps investors evaluate price trends by smoothing short-term fluctuations. This approach provides a clearer perspective on a stock's long-term direction. This technical indicator, coupled with the NKE stock's dismal outlook, indicates a negative market sentiment, and reflects doubts about NIKE’s financial health and prospects.

NIKE Stock Trades Below 50 & 200-Day Moving Averages

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Shares of the Beaverton, OR-based company have lost 23% in the past year, underperforming its industry peer’s collective decline of 18.7%. The NKE stock compared unfavorably against the broader Consumer Discretionary sector and the S&P 500 Index’s growth of 13.5% and 24.5%, respectively, in the same period.

NIKE's performance is notably weaker than its close competitor lululemon athletica inc. LULU, which has dipped 8.9% in the past year. NKE has lagged other industry peers, including Adidas ADDYY and Skechers’ SKX growth of 42.1% and 23%, respectively.

NKE’s One-Year Stock Performance

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At the current share price of $78.33, NIKE trades close to its 52-week low mark of $70.32. The stock price reflects an 11.4% premium to the company’s recent 52-week low. Meanwhile, the NKE stock’s price reflects a 27.1% discount from its 52-week high of $107.43.

What’s Behind NKE Stock’s Decline?

NIKE has long been a dominant force in the Shoes and Retail Apparel industry. However, recent headwinds, including supply-chain disruptions, rising costs, market saturation and declining sales in key segments, have raised concerns about its near-term growth prospects.

NKE has seen sustained softness in its lifestyle segment, alongside a drop in digital revenues, indicating shifting consumer preferences. The company faces declining retail traffic and sell-through rates in Greater China. These issues have led to slower revenue growth and compressed profit margins.

In first-quarter fiscal 2025, NIKE outlined plans to adjust timelines and reduce the supply of select classic footwear franchises across various channels, with a strong focus on recalibrating these within NIKE Digital — its largest business segment. However, these strategic moves are expected to create short-term revenue headwinds.

In second-quarter fiscal 2025, NKE’s classic footwear franchise sales declined at a faster rate than the overall business, accelerating the downturn seen in the previous quarter. NIKE Direct sales dropped 13% on a reported basis and 14% on a currency-neutral basis, including a 21% decline in NIKE Digital and a 2% dip in NIKE Stores. These trends highlight the ongoing impacts of the company’s franchise management strategy.

Supply-chain disruptions and reliance on Asia manufacturing continue to expose NIKE to geopolitical risks and labor shortages, affecting its operations. In Greater China, a key strategic market, declining consumer traffic and lower sell-through rates led to an 11% year-over-year revenue drop in second-quarter fiscal 2025, driven by macroeconomic challenges.

Inventory management remains a critical focus. NIKE acknowledged that inventory levels remain higher than expected, particularly in NIKE Direct, though partner-owned inventory has declined from the previous year. In response, the company is aggressively reducing aged inventory, aligning supply with demand in NIKE Digital, and ensuring sufficient marketplace capacity for its latest product assortments.

As part of its quarterly guidance, NIKE projects a low-double-digit revenue decline for third-quarter fiscal 2025, reflecting the impacts of strategic shifts, foreign exchange headwinds and restructuring efforts. The gross margin is expected to contract 300-350 basis points year over year, while SG&A expenses are anticipated to decline slightly due to prior-year restructuring charges.

While NIKE is actively repositioning its product strategy and addressing inventory challenges, near-term headwinds remain concerning. Investors should monitor the company's ability to stabilize sales, improve margins, and navigate its digital and international transitions before making investment decisions.

NIKE’s Earnings Estimates Trend Down

The Zacks Consensus Estimate for NKE’s fiscal 2025 and 2026 EPS has declined 3.2% and 3.3%, respectively, in the past 30 days. The downward revisions in earnings estimates indicate analysts’ reduced confidence in the stock.

For fiscal 2025, the Zacks Consensus Estimate for NKE’s sales and EPS implies 9.8% and 47.1% year-over-year declines, respectively. For third-quarter fiscal 2025, the consensus mark for sales and EPS indicates 10.3% and 69.4% year-over-year declines, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Premium Valuation for NKE Stock

Despite the stock’s lackluster performance, NIKE is currently trading at a forward 12-month P/E multiple of 34.55, exceeding the industry average of 28.06X and the S&P 500’s average of 22.42X.

Though trading much below its five-year high of 48.27X, the current valuation may be considered expensive, given the significant downside risks if the company's ongoing perils are not resolved for a prolonged period.

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Should Investors Shy Off From NKE Stock?

While NIKE's long-term brand strength and innovation remain intact, ongoing restructuring efforts and macroeconomic pressures could continue weighing on earnings. The company’s premium valuation, coupled with slowing growth rates, presents valid concerns for investors. The weaker guidance for the third quarter of fiscal 2025 dampens near-term growth prospects.

Investors should monitor the company’s ability to stabilize sales, manage inventory efficiently and regain traction in key markets before considering new positions. Given the current uncertainties, a cautious approach may be warranted for existing investors as the company navigates these headwinds.

Potential investors should consider waiting for clearer signs of recovery before investing in this Zacks Rank #5 (Strong Sell) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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NIKE, Inc. (NKE) : Free Stock Analysis Report

Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report

lululemon athletica inc. (LULU) : Free Stock Analysis Report

Adidas AG (ADDYY) : Free Stock Analysis Report

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