Nike (NKE -0.94%) stock investors had a difficult 2022. The leading footwear and apparel giant stumbled through a demand slowdown in key markets like China and the U.S. that left it with too much inventory heading into the critical holiday shopping season. That oversupply is likely to pressure sales and earnings results into early 2023.

But what about the bigger picture for this growth stock? Let's look at Nike's prospects for improving investor returns over the next several years, starting with 2023.

Growth challenges

Nike faces some major short-term challenges. The biggest red flag in its fiscal first-quarter report was a 44% spike in inventory levels, which jumped to nearly $10 billion. That surge looks even worse in the context of sales growth, which only landed at 10% after accounting for currency exchange rate shifts. Rival Lululemon Athletica achieved much better growth results, too, saying in its latest earnings update that sales rose 31%.

Nike executives said in late September that they believe their inventory challenges peaked this past quarter. Yet, they still forecast weaker profitability through the holiday shopping season due to promotions  by Nike and many peers as they work to get inventory levels back in line with demand trends.

The bright spots

The good news is that Nike is seeing lots of excitement for its new product launches like the Air Zoom running shoe and its Forward branded apparel . Sales were up 17% in the European market last quarter, for example, even as they were challenged in bigger markets like the U.S. and China.

Nike is also making good progress at shifting more sales away from wholesale partners like Foot Locker, so that it can capture more of the profit. "Our competitive advantages," CEO John Donahoe said in late September, "continue to prove that our strategy is working."

The rebound strategy

That rebound strategy involves launching a flood of new releases into the market to keep demand rising. At the same time, gross profit margin should climb higher, more toward Lululemon's stellar 56% of sales, as Nike sells more products directly to consumers.

NKE Gross Profit Margin Chart

NKE Gross Profit Margin data by YCharts

The impact of these initiatives should start showing up in metrics like sales growth and profitability, which are both under pressure right now. Rebounding results here might become clear by late 2023, if you believe Nike's management team. In that scenario, shareholders have a good shot at seeing better returns from Nike next year, and beyond.

You're getting a discount for the apparel stock today that reflects the elevated cloudiness around its short-term growth and earnings prospects. Nike shares are going for less than four times annual sales compared with a multiple of nearly six for Lululemon.

Looking back in three or more years, that valuation is likely to look like a steal considering Nike's impressive competitive advantages and its prime position in a growing global industry.

While the next few quarters might be rocky, investors have good reason to expect a rebound in both sales and profitability trends as early as mid-2023. And that success should support improving returns for shareholders willing to hold the stock through the upcoming volatility.