What's going on with Nike (NKE +1.79%)? The company is the largest athletic apparel company in the world, and it's one of the largest apparel companies of any kind, with nearly $47 billion in trailing-12-month revenue.
However, sales have been dropping, and other companies have been moving in on its territory. The stock has been plunging over several years, and it's down 34% so far in 2026 alone. Is it time to buy Nike stock on the dip?
A murky path forward
Nike's struggle features a confluence of factors, as these kinds of stories tend to do. It passed over wholesale partnerships to focus on its direct-to-consumer business, which allowed competitors to gain more views in footwear stores, and it turned its focus to core franchises at the expense of innovation in sport. That further provided opportunities for smaller companies like On Holding, to crack open the niches and grab market share.
Image source: Nike.
The company appointed a new CEO a year and a half ago, and it's reversing some of the actions that brought it to its current state. Nike has reestablished wholesale partnerships, which are now driving growth, and it has restructured operations to segment by sport. It's focused on bringing new products to market more quickly and targeting the athlete.
There has been some progress. Rather than continuing to decline, revenue stayed flat year over year in the 2026 third quarter (ended Feb. 28). Direct-to-consumer sales fell 4%, but wholesale revenue increased 5%. Nike CEO Elliott Hill mentioned several times during the earnings call that, while there's still work to do, he's confident the company has identified the right path forward.
NYSE: NKE
Key Data Points
There definitely is work to do, and Nike is still dealing with several headwinds. For starters, China's business environment is highly competitive, and it's trying to rebuild its brand there. Revenue in China fell 10% from last year in the third quarter.
In the meantime, Nike has excess inventory that it needs to sell off through markdowns, which erodes margins and branding. It's also still managing through higher tariffs, which are also impacting the bottom line. Gross margin declined from 41.5% to 40.2% year over year, falling to a five-year low, and net income was $500 million, 35% lower than last year.
Don't do it?
At the current price, Nike stock trades at 28 times trailing-12-month earnings. That's not super cheap, although it's below its five-year average. Those valuations price in Nike's brand and leadership positions.
The bright side of the stock drop is the dividend. It yields 3.9% at the current price, an attractive yield for passive income investors.
While Nike stock is struggling, I don't think it looks cheap enough to call a bargain. However, dividend investors can take advantage of this opportunity to lock in a great yield.
