Nike stock crash: Why investors are losing faith in sportswear giant

​Nike shares have plunged nearly 78% from their all-time high, and the market is increasingly skeptical that the situation will change. Sales in China are falling, competitors are taking customers, and the company’s previous strategy has failed. How did one of the world’s most recognizable sports brands end up in such a crisis?

From a record high to a multi-year low

On August 17, Nike shares closed at around $39, losing about 4% in a single day. This is one of the company’s lowest levels in recent years. Back in November 2021, Nike shares reached a record $177.5. Since then, they have fallen by nearly 78%.

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The latest wave of selling began after a weak report from Nike rival, Swiss sportswear company On Holding. In the second quarter, On reported sales of $1.076 billion, compared with market expectations of about $1.11 billion. The company also issued a cautious outlook for full-year 2026, forecasting revenue of $4.39 billion to $4.5 billion. Investors viewed the figures as a sign of slowing demand for athletic footwear and apparel.

The reaction was particularly painful for Nike. On continues to grow and attract customers in the premium running shoe segment, while Nike has spent several years trying to restore its previous growth rates. The weaker outlook from a rival therefore reinforced concerns that pressure on the broader sector could persist longer than the market had expected.

The direct-to-consumer bet did not work

The company’s financial results provide another reason why investors are reluctant to expect a quick recovery. In the fiscal fourth quarter, Nike generated $11 billion in revenue, down 1% from a year earlier and its lowest quarterly figure since February 2022. On a currency-neutral basis, revenue declined 4%.

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Net income reached $1.07 billion, but almost all of the boost came from a one-time $986 million tariff refund. The refund also significantly improved gross margin, which rose to 49.2% from 40.3% a year earlier. According to Nike, without that benefit, margins would have been roughly flat. For the full fiscal year, the company’s profit declined 3%.

For the coming quarter, Nike expects revenue to decline by a low- to mid-single-digit percentage. The company also forecasts roughly flat earnings over the following quarters, excluding one-time tariff-related benefits. After the June earnings release, Nike shares fell by as much as 9% at one point.

One of the main problems was the company’s focus on direct-to-consumer sales. For several years, Nike reduced its presence at third-party retailers and shifted toward its own stores, apps, and website. The shelf space it gave up was eventually filled by Hoka, On, and other competitors. In the latest quarter, Nike’s direct sales fell 7% on a currency-neutral basis, while its wholesale business grew 1%.

CEO Elliott Hill has decided to change course. Nike is once again expanding its relationships with retailers and placing greater emphasis on individual sports, product innovation, and performance lines.

China has become the biggest source of problems

China remains a major challenge for the company. Nike’s sales in the region have declined for eight consecutive quarters, while its China business has shrunk by about 30% since 2021. By the end of May, annual revenue had fallen to its lowest level in eight years. At the same time, China’s sportswear market has grown by about 51% over the past five years.

Just a few years ago, China was Nike’s fastest-growing region. It has now become the company’s smallest market. In fiscal 2026, Nike’s Greater China revenue fell 11%, or 13% on a currency-neutral basis. In the latest quarter, the decline reached 17%.

Local competitors have also become stronger. Younger consumers are increasingly choosing Anta and Li-Ning, while the popularity of the China Chic movement has boosted interest in domestic brands. In recent years, these companies have improved product quality, marketing, and new-model development. Nike, meanwhile, continued to rely heavily on a global product assortment that did not always reflect local consumer preferences.

Against this backdrop, the company has begun restructuring its China business. Nike appointed its first dedicated head of local product creation in Greater China and is preparing collections designed specifically for Chinese consumers. Over the next 18 months, the company plans to expand local footwear and apparel development, taking into account regional preferences in design, fit, and color.

The distribution model is changing as well. After the pandemic, Nike was left with a complex network of online distributors, with the same products often sold across multiple platforms at discounted prices. The company has decided to close some of these online stores and strengthen its control over pricing and brand presentation. According to BNP Paribas analyst Laurent Vasilescu, the restructuring could reduce Nike’s annual revenue in China by nearly $1 billion, or about 17% of regional sales.

What lies ahead for the sportswear giant

The 78% decline in Nike shares shows how dramatically investor expectations have changed. The market no longer assumes that the strength of the brand alone will be enough to drive a recovery. Nike needs to return to sales growth, rebuild its position with retailers, accelerate product launches, and prove that the restructuring of its China business is working.

The first steps have already been taken, but they will take time and could put additional pressure on revenue. Closing some sales channels in China, returning to wholesale partners, and changing the product strategy are unlikely to deliver quick results. Nike now needs to convince both consumers and investors that the brand can once again grow faster than its competitors.