Investors have had a rough ride with Nike (NKE -0.25%), On Holding (ONON +9.55%), and Deckers Outdoor (DECK -0.31%) this year, with each stock down between about 25% and 43%. The Federal Reserve just lifted its benchmark rate at the September meeting and signaled it is prepared to stay tough on inflation, which continues to put pressure on consumer names that depend on discretionary spending.
If the Fed keeps hiking, the stock that looks most durable to me in this trio is Nike. Here's why.
Image source: Getty Images.
The Fed is tightening into a brand story, not a fad
The latest Federal Open Market Committee decision raised the target range to 3.75% to 4%, the first move higher since 2023. Higher rates raise the discount rate on future earnings and hit companies that depend on aggressive growth assumptions. In my opinion, that is part of what has dragged down On Holding and Deckers Outdoor, which live closer to the "hot growth story" end of the spectrum.
Nike sits in a different place. It has years and years of brand equity with athletes, fans, and casual wearers that does not vanish because borrowing costs are higher. The swoosh shows up on youth leagues, global tournaments, and everyday errands, which gives Nike a base of demand that feels more like a habit than hype. When rates stay elevated, that kind of deep brand relationship matters.
NYSE: NKE
Key Data Points
Nike is modernizing its engine while the stock slumps
Nike's stock has taken a beating this year, but the company is making bigger changes that could matter well beyond the next quarter. In April, Nike laid out a plan to streamline factories and logistics, roll out technology faster, build skills internally, and tighten relationships with suppliers and partners.
It is also concentrating its technology teams around its Oregon headquarters and its India technology center, while updating Air Manufacturing Innovation sites in Beaverton, St. Louis, and Vietnam. Bringing materials development closer to footwear and apparel supply chains could help Nike move products from concept to market faster. This is all proof of my longer-term case for Nike: Even in a tougher consumer and interest rate environment, it still knows how to be relevant with products, cultural attention and sales.
Nike feels too embedded in the fabric of sport and culture to stay out of favor forever, and the work happening behind the scenes gives that brand strength more room to show up in future earnings once the macro story calms down.
Why Mbappé's move matters for On
That said, Kylian Mbappé choosing On Holding after being with Nike is a big moment. Just today, the Real Madrid and France star ended nearly two decades with Nike to become the face of On's push into soccer, with an equity stake and a role helping design and test boots and apparel. On has hired Thierry Henry as director for this sport and plans to launch its first soccer boots in the coming years, with Mbappé positioned as the heart of that effort.
NYSE: ONON
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For On, this is really huge, and it pushes back against my argument that Nike will stay in brand favor forever. Landing one of the biggest names in the sport is a strong nod from a player who could have stayed with the established giants. It tells me that On has earned enough trust to become the platform for a new sports category, and it could be the starting point of a brand turnaround if the company executes on product and distribution.
It also sits in direct tension with Nike's historic strength in soccer. Nike lost one of its primary global ambassadors in the sport to a much smaller rival, which shows how the brand landscape is shifting. For now, Nike still has the broader recognition, but Mbappé's move is a reminder that new stories can catch up faster than many investors expect.
