Nike (NKE 0.40%) is a top apparel company that can command a premium for its sneakers, but that doesn't mean its business is infallible. The Oregon-based company recently announced that it would be shutting down its iconic factory store in Portland.

This isn't just a random location it's closing due to a slowdown in business -- it is the company's flagship location, which has been part of the business since 1984 and was its first factory store. Could this be a sign that Nike's upcoming earnings report may not be all that strong?

Why Nike is shutting down the store

Last year, Nike announced it was temporarily shutting down the store due to safety concerns. But what started out as temporary has ended up becoming permanent this year.

Portland Mayor Ted Wheeler admits that security has been a big problem for the store. While the company hasn't said so outright, the outlet may be suffering from "shrink" -- the industry term for lost inventory, often due to theft. "My team and city staff have worked tirelessly and in good faith with Nike for almost a year to offer creative solutions to their safety challenges," he said.

Although the company says it is still considering locations in the area, this is a considerable move for the business, and it highlights just how significant the challenges have been for Nike.

Nike is just the latest retailer to deal with "shrink"

Retailers have been struggling with a rise in shrink this year, and it has impacted the earnings results for many companies. Dick's Sporting Goods said on its most recent earnings call that its "profitability was short of our expectations due in large part to the impact of elevated inventory shrink."

Home Depot is locking up items as low as $50 to battle theft. Shrink has also been such a significant problem for discount retailer Dollar Tree that it is even considering not carrying certain items anymore.

Nike didn't blame shrink when it last reported earnings in June, but its business has also been struggling as its revenue has been growing at a decreasing rate.

NKE Revenue (Quarterly YoY Growth) Chart

NKE Revenue (Quarterly YoY Growth) data by YCharts

The company says it will release first-quarter earnings for its fiscal 2024 on Sept. 28. It'll be an important report for investors to see if shrink is also weighing down the business, as it is with other retailers, or if Nike's problems are contained to certain locations, including the Portland store.

Is Nike's stock a buy?

Shares of Nike are down 18% this year as worsening economic conditions and rising interest rates are weighing on investor confidence in retailers. But even with the drop in value, the retail stock is trading at close to 30 times its trailing earnings. The average stock on the S&P 500 trades at a multiple of just 20.

The company's lackluster growth rate simply isn't strong enough to suggest that the stock is a good buy, even at its reduced valuation. Plus, the company is facing multiple headwinds. Theft appears to be more of a question mark for the company. Inflation is still causing problems for consumers, which impacts the affordability of the company's high-priced products. And student loan repayments resume next month, which may exacerbate those concerns.

It's a challenging time for the company, and without more of a discount, the stock simply looks too expensive to buy right now. Investors should at least wait until after evaluating Nike's upcoming earnings report before deciding whether to buy the stock or not.