If You Ran Nike, What Would You Do?
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If you own Nike (NKE), the past five years have been painful. The stock lost 75.7% counting dividends, while the S&P 500 returned 75.6%. A recovery would depend mostly on how much of its old profit margin Nike can win back.
Yet the business has not shrunk much. Over the four quarters to August 2026, Nike sold $45.9 billion of shoes, clothes and equipment, about as much as in the same four quarters of 2021. Imagine you were handed the keys on Monday: which of Nike’s problems is worth the most money?
Your Prize Is $3.5 Billion Of Lost Margin
In the four quarters to August 2021, Nike kept 15.8 cents of operating profit from each dollar of sales. That figure fell to 8.2 cents in the latest four quarters. On Nike’s current revenue, each point of operating margin is worth $459 million a year. Nike has lost 7.6 points, so winning them back is worth about $3.5 billion a year.
Nike’s margin is already level with the 8.3% median of its peers, so the gap that matters is against Nike’s own past. That median comes from only two peers with figures: Gildan Activewear at 17.0% and Under Armour at -0.5%. Your first goal would be plain: get operating margin back toward where it stood five years ago.
Management is already working on costs. It expects Pace, its program to cut costs and speed up decisions, to deliver approximately $2.5 billion in savings, with most of them realized in fiscal 2029 and 2030, and it plans to reinvest a portion of the savings back into the business.
Nike’s Performance Business Is Already Growing
On its October 1, 2026 call, management said its NIKE Performance business was up high single digits in fiscal Q1 2027, with double-digit growth in Running, Global Football, Tennis and Golf. Performance products drove sales in North America, where sales grew 2%, management said.
Still, Nike’s total revenue fell 4.3% in fiscal Q1 2027, and management said Performance is not yet large enough to offset the pressure elsewhere.
Why Nike’s Sportswear, Jordan And China Sales Are Falling
Sales in these three businesses are falling partly because Nike is cutting supply on purpose, management said. In Sportswear, some older, higher-volume shoes also sold below expectations. Sportswear, just under half of fiscal Q1 2027 revenue, fell by low double digits, and Nike reduced revenue from the Dunk by nearly 50%, as planned.
Jordan Brand, 13% of the business, fell by mid-teens as Nike cut back retro launches it says it had been oversupplying. In Greater China, revenue fell 26% as Nike began cleaning up its online sales there and cutting channels, management said, to reduce the deep discounting of its brands.
Management expects these actions to keep weighing on sales and forecasts fiscal 2027 revenue to decline in the high single digits. So part of the decline is a choice you might keep making.
What You Would Protect, And Nike’s Dividend Call
The gross margin is worth protecting. It rose to 42.8% in fiscal Q1 2027 from 42.2% a year earlier, helped by supply chain cost management and currency, management said. Debt has come down too, falling to $11.1 billion from $12.8 billion five years earlier.
The hardest call is whether to keep paying the dividend at its current size. Nike paid $2.4 billion in dividends over the last four quarters, more than the $2.1 billion of free cash flow it produced. Buybacks have all but stopped, at $20 million over the same four quarters, yet management said the dividend remains a significant priority.
Investors pay 18.4 times Nike’s earnings, against 21.9 for the S&P 500. That lower price comes with management’s own forecast that fiscal 2027 earnings before interest and taxes will fall by a greater percentage than revenue. Nike’s operating margin, 7.9% in fiscal Q1 2027, is the number to watch when the company is expected to report again in December 2026.
Does This Mean You Should Act On NKE?
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