Why Nike Stock Has Lost 70% From Its Peak — And What Comes Next

Not too long ago, Nike stock seemed untouchable. In November 2021, the brand was flooding social media with Air Jordans and Dunks, and the question on investor calls wasn’t whether Nike would continue to win, but rather by how much. At that time, the shares had risen above $170. The mood in Beaverton has changed from swagger to something more akin to quiet embarrassment, and the stock is currently trading close to $45.68, down more than 70% from that peak.

The slowness of the slide is what makes it unique. There was not a single disaster, fraud, or recall. Rather, a steady stream of missed quarters, worn-out product lines, and an excessive dependence on direct-to-consumer sales, which appeared brilliant during the pandemic but now appears more and more naive. The shelves at a JD Sports in London or a Foot Locker in Chicago tell the tale. Once a draw, the Dunk wall is now crowded and undervalued. Sitting close by, Hoka and On are more expensive and appear to be moving more quickly.

This week, the most recent injury came from an unexpected source. The new CEO of Lululemon is Heidi O’Neill, a veteran of Nike for more than 20 years and most recently its president of consumer, product, and brand. When Elliott Hill took over and started restructuring last spring, her position at Nike was eliminated. With institutional memory in tow, she now lands at a rival. The news caused Lululemon’s stock to drop 5%, but Nike should likely be more concerned. It’s one thing to lose a senior executive to a rival. Another is losing her to a company that has been stealing Nike’s high-end lunch.

Nike’s own statistics paint a mixed picture. Earnings exceeded projections by more than 41 percent, and quarterly revenue of $11.28 billion was marginally higher than anticipated. The stock should have benefited from that. It didn’t. Investors appear to think the beats are purely cosmetic, driven more by aggressive marketing and inventory clearing than by a true recovery in demand. Once a drowsy footnote, the dividend yield of 3.59 percent now reads like an apology. Nike is compensating investors for their patience.

It’s difficult to ignore how the brand’s cultural climate has cooled. Sneaker drops used to go viral on Twitter for days a few years ago. Colin Kaepernick’s campaign seemed like a successful corporate gamble. Today, the dialogue seems more subdued, the partnerships less crucial, and the marketing less astute. The serious runner, the fitness-obsessed professional, and the person prepared to pay $180 for a pair of shoes without haggling are the exact types of customers that rivals like On Running and Hoka have amassed followings among.

The current CEO, Hill, has publicly discussed “fixing” the fundamentals, such as reestablishing wholesale relationships, slowing the pace of product launches, and shifting the emphasis from lifestyle churn to sport performance. It’s a workable plan. The question is whether it’s quick enough. Nike continues to be by far the biggest sports brand in the world, with yearly sales of over $46 billion and operations in nearly every worthwhile nation. Empires don’t fall apart suddenly. They do, however, erode.

As this develops, it appears that Nike stock is at a crossroads rather than a crisis. Either Nike becomes a warning about what happens when a brand starts to believe its own mythology, or the turnaround takes hold over the next twelve to eighteen months, margins stabilize, and the shares start their long journey back toward respectability. Which story is developing will likely be revealed in the upcoming earnings reports.