Margins Under Fire: Can NIKE's "Win Now" Actions Bring Long-Term Gains?

NIKE Inc.’s NKE first-quarter fiscal 2026 results show a company fighting through margin pressure while doubling down on its transformation agenda. The sportswear giant’s “Win Now” actions, focused on sharpening product innovation, elevating the marketplace and reorganizing teams by sport, are beginning to show early green shoots. 

Running delivered more than 20% growth, and wholesale returned to growth with an 11% increase in North America. Moreover, the spring order book is up, underscoring renewed partner confidence. Despite these momentum pockets, NIKE’s margins remain under heavy strain. Gross margin contracted 320 basis points (bps), pressured by higher wholesale and factory-store discounts, elevated product costs and new reciprocal tariffs that now represent an annualized cost headwind of roughly $1.5 billion. 

Management estimates that the new tariff regime will remain a material headwind through fiscal 2026, limiting near-term margin recovery. For second-quarter fiscal 2026, the company expects gross margin to decline 300-375 bps, comprising a 175-bps negative impact from the new incremental tariffs. 

NIKE is also navigating structural challenges in Greater China, softness in NIKE Digital, and a deliberate reset of aging classic footwear franchises across Nike, Jordan, and Converse. Digital traffic remains down double digits as the company pulls back promotions to rebuild a healthier full-price mix. Meanwhile, China’s highly promotional marketplace and lagging in-season sell-through continue to drag profitability.

Nonetheless, the company’s management remains confident. As the Sport Offense reorganizes teams into smaller, sport-specific units, NIKE believes it can reignite organic growth, improve product flow, and rebuild full-price momentum, essential ingredients for a return to double-digit margins over time. The near-term will be messy, but NIKE argues the payoff will come as innovation cycles strengthen and marketplace health fully restores.

What Is the Margin of NKE’s Peers: LULU & ADDYY

As investors weigh NIKE’s pressured profitability, comparing its margins against peers like lululemon athletica inc. LULU and adidas AG ADDYY offers essential context on where the brand stands in the broader athletic-apparel landscape.

lululemon’s margin performance remains under pressure as higher tariffs, the loss of de minimis benefits, and elevated markdowns weigh on profitability. However, management’s disciplined approach, spanning selective pricing actions, vendor negotiations, and enterprise-wide cost controls, aims to soften the impact. While near-term margins will stay compressed, LULU’s product reset, faster go-to-market processes, and stronger innovation pipeline position the brand for healthier, more sustainable margin gains in the long term.

adidas’ margin performance continues to strengthen, supported by disciplined cost management, improved product and freight costs, and strong full-price sell-through. Despite currency pressures and higher U.S. tariffs, the company expanded gross margin and operating margin in third-quarter 2025, signaling effective execution. With ongoing brand momentum, deeper market localization, and a sharper performance and lifestyle mix, ADDYY’s strategic actions appear well-positioned to deliver durable, long-term margin gains.

NKE’s Price Performance, Valuation & Estimates

Shares of NIKE have lost 17.4% year to date compared with the industry’s decline of 18.8%.

From a valuation standpoint, NKE trades at a forward price-to-earnings ratio of 30.25X compared with the industry’s average of 26.21X.

The Zacks Consensus Estimate for NKE’s fiscal 2026 earnings implies a year-over-year decline of 24.1%, while that for fiscal 2027 indicates growth of 54.8%. Earnings estimates for fiscal 2026 have been southbound in the past seven days. Meanwhile, the consensus estimate for fiscal 2027 has been stable in the same period.

NIKE stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research