Will Nike Stock Ever Be a Winner Again?

Core Insights - Nike is facing significant challenges in the current consumer economy, with its stock down 53% over the past five years and a decline in return on equity from 43.1% in 2022 to 23.3% in 2025 [1][2] Financial Performance - The company's quarterly gross profits have been declining since 2023, and despite beating earnings expectations in Q2 of fiscal 2026, the stock price fell 10% following the earnings call due to disappointing revenue from China, which was down 17% year-over-year [1][6] Market Challenges - Nike is impacted by tariffs, expecting to incur $1.5 billion in costs for fiscal year 2026, which will reduce its gross margin by 1.2% [3] - The company is also experiencing declining revenue in China, a crucial market for its future growth [5][7] Consumer Behavior - U.S. consumers are becoming more price-sensitive, with 48% not planning to buy footwear during the 2025 holiday season, and 65% of potential buyers citing tariffs as a reason for increased prices [8][9] Strategic Changes - CEO Elliott Hill, appointed in October 2024, is implementing a turnaround strategy focused on rebuilding relationships with wholesale partners and regaining retail shelf space, moving away from the previous leadership's e-commerce discount strategy [8]