There's no denying it. Artificial intelligence has been the hottest topic in recent years. But over the past 12 months, tariffs have attracted investor attention. And Nike (NKE 0.20%), a business with a global supply chain, has felt the negative effects.
What's more, the market has been anything but smooth this year. As geopolitical tensions rose with the start of the Iran war in late February, the S&P 500 index dropped 5% in March.
Nike shares continue to feel the pain in this uncertain environment, as they are down 30% in 2026 (as of April 24) and significantly off their peak. In the face of tariffs and volatility, is this consumer discretionary stock still a long-term buy?
Image source: The Motley Fool.
It's hard to remember the last time this sportswear giant was a smart buy
Nike holds a leadership position in the global sportswear market. However, that doesn't mean its success is guaranteed. The company hasn't proven in recent years that it's worthy of being a long-term investment.
This wasn't always the case. During the five-year period leading up to its record high in November 2021, the stock price surged 255% higher. This happened on the back of fundamental strength. Between fiscal 2016 and fiscal 2021, Nike's diluted earnings per share climbed at a nearly 11% annualized rate.
This certainly looked like a solid investment candidate at the time, boosted by the robust market environment in 2021. But investors are struggling to adopt a positive mindset today.
NYSE: NKE
Key Data Points
Nike's turnaround is taking time
While tariffs and volatility are headline topics that get a lot of attention, they aren't the most important variables impacting Nike's operations. This business has struggled for years now. Investors should turn their attention to the fundamentals.
Nike's problems stemmed from internal strategic blunders. It flooded the market with an inventory glut of classic footwear that lost its appeal. The previous CEO, understandably, focused the business more on direct-to-consumer channels than wholesale partnerships. And a lack of exciting product innovation opened up the door to competitive threats.
It's not all Nike's fault, however. To be fair, the surprise shift in trade policies was something completely outside its control.
Nonetheless, it has definitely hurt Nike. The leadership team said in December that higher tariffs would add an incremental $1.5 billion to product costs in the U.S. This resulted in gross margin contraction of 300 basis points in the latest quarter. The good news, though, is that trade-related headwinds should stabilize in the first quarter of 2027.
It's clear that a successful turnaround won't happen overnight. "It's taken longer than I would like," CEO Elliott Hill said on the Q3 2026 earnings call.
Until Nike's revenue and profit base start growing sustainably, this consumer discretionary stock is not worthy of your hard-earned savings.
