Nike Performance Business Grows But Stock Struggles

Nike (NKE) is facing a challenging period, with its stock dropping about 51% over the past year, while the S&P 500 gained 16%. Despite this, the company’s performance business, which focuses on sports products like running, football, tennis, and golf gear, is showing growth. This segment reached $16 billion in the last fiscal year and grew at a high single-digit rate in the first quarter of fiscal 2027, even as Nike’s total revenue fell 4% to $11.2 billion.

The performance business, however, isn’t large enough to offset declines in other areas, particularly sportswear, the Jordan Brand, and Greater China. Sportswear, which includes the Dunk sneaker, made up nearly half of Nike’s first-quarter revenue but fell by a low double-digit percentage. The Jordan Brand, accounting for 13% of the business, also declined by a mid-teens percentage, while revenue in Greater China dropped 26%. Nike intentionally reduced Dunk sales by nearly 50% to avoid discounting, which impacted overall revenue.

Management anticipates continued revenue declines in fiscal 2027 and into fiscal 2028 due to supply cuts and strategic changes in China. Operating profit is expected to fall more sharply than revenue, with adjusted earnings guided between $1.15 and $1.35 per share, below analyst estimates of $1.65. Excluded from this forecast is about $0.15 impact from Pace, a program expected to deliver $2.5 billion in savings. Nike plans to provide a clearer view of its long-term growth strategy at its Investor Day in November.

Investors remain cautious, as the performance business alone cannot prevent total sales from shrinking. Slower growth in this segment or further declines in other areas could signal deeper challenges. The stock currently trades at 16.3 times its trailing twelve-month earnings, lower than the S&P 500’s 21.5 multiple, reflecting ongoing concerns about Nike’s future performance.