Nike shares dropped 4% Monday to a 12-year low under $40, extending a five-year slide that has erased more than three-quarters of the company's value. The move came without a fresh catalyst, leaving the decline to speak for itself.
The slide has no single catalyst
The stock peaked in 2021 on pandemic-fueled demand. Since then, a string of strategic missteps, soft discretionary spending, rising competition, and the drag from tariffs and inflation have unwound the business. Monday's drop coincided with a weak report from On Holdings, climbing long-term rates that signal sticky inflation expectations, and an unresolved tariff backdrop, none of it specific to Nike, all of it weighing on the sector.
Margins and the tariff refund
Gross margin has fallen from roughly 48% to 40% over the past five years, excluding a one-time spike in the most recent quarter. That spike came from a $986 million refund tied to International Emergency Economic Powers Act tariffs, which lifted net income temporarily. With those headwinds now rolling off, the company says gross margins should expand this quarter, which closes in November. Revenue for the first half is still expected to decline low-to-mid single digits.
Green shoots in running and North America
Running, a core category, has shown traction: market share has risen five percentage points over the last five quarters, adding $1 billion in revenue. That suggests the company is pushing back against On Holding and Deckers' Hoka. In North America, its largest market, revenue grew 5% in fiscal 2026, a sign the "Sport Offense" strategy is gaining traction.
The wholesale pivot
After years of neglecting wholesale under former CEO John Donahoe, Nike has reinvested in the channel. Wholesale revenue grew double digits in the period. Management argues the lessons from the North American turnaround can be applied elsewhere. Whether that translates into a sustained recovery remains the open question.