NIKE Stock Slumps Nearly 30% in a Year: Still Worth Your Money?

Core Viewpoint - NIKE Inc. is facing significant operational challenges, leading to a substantial decline in stock performance compared to industry peers and broader market indices [1][11][12]. Group 1: Stock Performance - NIKE's stock has decreased by 29.6% over the past year, underperforming the industry average decline of 24% and the S&P 500's growth of 26.3% [1][11]. - The current share price of $76.42 is close to its 52-week low of $70.75, reflecting a 29.1% discount from its 52-week high of $107.85 [14]. - NIKE is trading below its 50-day and 200-day moving averages, indicating bearish market sentiment [14]. Group 2: Operational Challenges - The company is experiencing sluggish sales in its lifestyle segment, issues in Greater China, and a decline in digital sales, which are negatively impacting revenue growth and profit margins [11][16]. - Second-quarter fiscal 2025 results showed an 8% year-over-year revenue decline, with significant drops in classic footwear franchises and NIKE Digital sales [23]. - The company anticipates a gross margin decrease of 300-350 basis points year-over-year for the fiscal third quarter [18]. Group 3: Earnings Estimates - The Zacks Consensus Estimate for NIKE's fiscal 2025 and 2026 EPS has declined by 21.5% and 22.1%, respectively, indicating reduced analyst confidence [19]. - For fiscal 2024, the consensus estimates imply year-over-year declines of 9.6% in sales and 45.3% in EPS [25]. - The guidance for the third quarter of fiscal 2025 suggests a low-double-digit revenue decline, reflecting ongoing challenges and increased foreign exchange headwinds [24]. Group 4: Strategic Initiatives - CEO Elliott Hill has initiated actions to reposition the business, including transitioning to a full-price digital model and reducing reliance on promotional activities [5]. - The company is scaling back its investment in performance marketing, which is expected to reduce paid traffic [5]. Group 5: Valuation Concerns - Despite the stock's poor performance, NIKE is trading at a forward 12-month P/E multiple of 32.94X, which is higher than the industry average of 57.52X and the S&P 500's average of 22.22X [8]. - The current valuation may be considered expensive given the significant downside risks if the company's challenges persist [26].