Nike shares hit 12-year low as 'patriotic consumption' trend bites in China

Nike shares fell to their lowest level in 12 years Monday as the global sportswear brand struggles with deteriorating earnings.

In China, its key market, Nike has lost ground to local rivals such as Anta Sports and Li-Ning, which have ridden a wave of "patriotic consumption" — known in Chinese as guochao — while a broader slowdown in Chinese consumer spending has further weighed on sales.

Nike closed down 4.03% at $39.09 on the New York Stock Exchange on Monday, breaking below the $40 mark. The closing price was the lowest since September 2014 and represented a 78% decline from the stock's all-time high of $177.51, reached in November 2021.

Nike reported fiscal fourth-quarter sales of $11 billion and diluted earnings per share of $0.72 in late June.

Yahoo Finance noted that while earnings per share appeared to have improved, the figure was distorted by a one-time gain of $0.52 from an anticipated tariff refund, making the underlying result misleading.

Sales for the fiscal first quarter were expected to decline by a low-to-mid single-digit percentage. Excluding the tariff refund benefit, earnings per share are forecast to remain flat for the next three quarters.

"There are no signs of a revenue inflection in the near term," said Michael Binetti, an analyst at Evercore ISI. "There is no clear reason to expand the price-to-earnings multiple, which currently stands at 22 times the fiscal year 2027 earnings-per-share consensus."

Analysts cite shifting sneaker preferences, the rise of competitors such as Swiss brand On, and declining China sales as the main reasons for the bearish outlook.

Rival Swiss company On Holding reported second-quarter sales of $1.08 billion, falling short of the market consensus of $1.11 billion, fueling concerns that demand in the premium athletic footwear and sportswear segment may be cooling.

Nike's retreat in China has been particularly pronounced. The company's fourth-quarter China sales came in at approximately $1.3 billion, down 12 percent year on year, extending a losing streak to eight consecutive quarters. Online direct-to-consumer sales in China fell a steep 29 percent.

Amid slowing Chinese consumption and US-China tensions, domestic brands have grown rapidly by championing patriotic consumption, steadily eroding the premium market that American brands once dominated.

JP Morgan downgraded Nike earlier this month to "underweight" from "neutral" and cut its price target to $40 from $47, citing concerns that the sales gap from a restructuring of China's online retail channels and store closures in the United States could weigh on the company longer than expected.

LeBron James, the NBA star who has long served as one of Nike's signature endorsers, told Yahoo Sports that Nike needs to "go back to the basics" in response to the brand's struggles — meaning the company should reconnect with local communities and younger generations to understand what they want, as it once did.