Nike (NYSE: NKE), the world’s largest seller of athletic apparel and shoes, is largely a fashion company now.
That’s because its performance products – those designed for serious athletes – have been commoditized. Competitors are making apparel and footwear that perform just as well as Nike. That includes Adidas (CBOE: ADS), Asics, Authentic Brands Group’s Champion, Fila, Hoka, New Balance, On, and Under Armour (NYSE: UAA).
In the past Nike, named after the Greek goddess of victory, was the clear leader in terms of product performance. But now its product quality appears about equal to those competitors. So the differentiator between them is largely style.
Nike used to have a clear advantage there as well. It was founded in 1971 by Phil Knight and his college track coach Bill Bowerman. Nike turned Knight into one of the top businessmen in history.
He boosted the company’s fortunes by bringing star athletes aboard as endorsers. The first big U.S. name was running titan Steve Prefontaine. Later came tennis legend John McEnroe. The clincher was Michael Jordan, perhaps the best basketball history and a global icon, thanks partly to Nike.
Stock price to the moon
The combination of first-rate performance and style for Nike’s products drove its profits and stock price ever higher. From its initial public offering in 1980 through 2021, the stock skyrocketed 92,500%.
But everything changed starting in 2021. From November of that year until April 2025, the stock plunged 70%. Nike suffered from the rise of competitors, lack of advances in performance products, lack of new appealing fashions and a decision to cut sales through some of its wholesalers, such as Foot Locker (NYSE: FL).
Nike sought to sell more to consumers directly through its web site, bypassing wholesalers to keep more profit for itself. The move backfired, as Nike alienated the wholesalers while direct sales ultimately slumped.
But now the company is on the rebound. It changed CEOs in 2024, naming former Nike executive Elliott Hill to the top slot. He has implemented a turnaround plan: Win Now. The idea is to revive wholesale partnerships, boost premium e-commerce, improve product innovation, and shift from lifestyle to performance-based products.
Fashion factor and earnings
The focus on performance products may end up depending more on fashion than their performance, given the commoditization of performance products that we discussed above. Fashion may be what distinguishes the performance merchandise.
In any case, the turnaround plan hasn’t been sufficient to reverse Nike’s earnings slide yet. Revenue fell 10% in the year ended May 31, and profit fell 44%. But earnings have been beating analyst expectations in recent quarters, and many investors and analysts are optimistic about Nike’s future. So the stock has jumped 42% from its April low.
One Nike bull is Morningstar analyst David Swartz. “We believe it will recover from its recent problems,” he wrote in a commentary. “While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.”
A rebound for Nike is certainly possible, and it may depend on the success of Nike’s fashion.
The author owns shares of Nike.
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