Nike Credit Rating Downgraded Amid Slower Recovery Concerns

Nike Inc (NYSE:NKE) shares dipped on Monday following a downgrade of its credit rating by S&P Global Ratings. The firm lowered Nike’s long-term issuer credit rating from A+ to A, citing a prolonged recovery period, particularly in China and for its sportswear and Jordan lines, which together account for over 60% of revenue. S&P anticipates weaker revenue, profit, and cash flow over the next two years due to excess inventory and competitive pressures.

The downgrade also reflects Nike’s recent cost-cutting measures, which include $1 billion in restructuring charges over the next three years. S&P expressed concerns that simultaneous leadership and board changes could further slow the company’s efforts to restore profitability and cash flow. In China, revenue plummeted 26% in the first fiscal quarter, with S&P forecasting a roughly 30% decline for fiscal 2027 due to heavy discounting, intense competition, and poor digital execution.

S&P’s projections highlight significant financial pressures for Nike, including a revenue drop of more than 7% in fiscal 2027, rising leverage to 1x by the end of fiscal 2027 and 1.4x in fiscal 2028, and an estimated $1.2 billion annual cash burn over the next two to three years. The negative outlook suggests a potential further downgrade if Nike fails to stabilize its business or if free operating cash flow falls below 25% of debt.

At the time of publication, Nike shares were down 0.35% at $33.72. Meanwhile, Lululemon Athletica Inc (NASDAQ:LULU), a direct competitor, also saw a decline, with shares falling 2.29% to $92.38, marking a new 52-week low.