Can NIKE Regain Its Stride as China and Digital Momentum Falter?

NIKE Inc.’s NKE efforts to regain momentum are being tested most acutely in two areas that once powered its growth story: China and digital. Management acknowledged in the second-quarter fiscal 2026 earnings call that the company’s performance in Greater China remains under pressure, reflecting a challenging consumer environment, elevated promotional intensity and softer traffic trends.

China, historically a key profit engine, is yet to show a convincing recovery, with demand remaining uneven across categories. This prolonged weakness is significant, as China’s scale and margin profile mean even modest underperformance can weigh heavily on consolidated results and investor confidence.

At the same time, NIKE’s digital business, another former growth pillar, is struggling to reaccelerate. Management highlighted ongoing resets in the digital channel, including a pullback from aggressive promotions and efforts to rebalance inventory and assortments. While designed to protect brand equity and pricing power in the long term, these moves have created near-term pressure on digital traffic and conversion. The slowdown underscores how difficult it has been for NIKE to recalibrate its direct-to-consumer strategy after years of rapid digital expansion.

Together, these challenges complicate NIKE’s broader turnaround ambitions. China and digital are not peripheral businesses; these sit at the core of NIKE’s growth and profitability framework. Continued softness in both limits operating leverage, constrains revenue growth and raises execution risks around the company’s reset strategy.

While management remains confident that brand strength, product innovation and channel discipline will ultimately restore momentum, it notes that a meaningful turnaround is unlikely without visible stabilization in China and a clearer path to renewed digital growth. Until then, NIKE’s recovery narrative remains a work in progress rather than a finished sprint.

How Exposed Are ADDYY & LULU to China & Digital Demand?

As NIKE’s China and digital engines lose momentum, investors are increasingly asking whether adidas AG ADDYY and lululemon athletica inc. LULU face similar exposure, or are better positioned to weather the same demand headwinds.

adidas shows meaningful but well-balanced exposure to both China and digital demand. The third-quarter 2025 results highlight double-digit growth in Greater China, supported by strong local brand momentum, underscoring the region’s importance to adidas’ growth profile. At the same time, e-commerce and broader DTC channels delivered double-digit gains, reinforcing digital as a key growth engine. Any slowdown in either area could temper momentum, though current execution appears resilient.

lululemon has high exposure to both China and digital demand, as underscored in its third-quarter fiscal 2025 results. Mainland China is now the company’s second-largest market, delivering outsized growth and remaining central to its international expansion strategy. Digital is equally critical, accounting for a sizable share of revenues and driving guest engagement through e-commerce and membership initiatives. Any slowdown in either lever would meaningfully influence LULU’s growth trajectory.

NIKE’s Price Performance, Valuation & Estimates

NKE shares have lost 17.8% in the past six months compared with the industry’s 16.6% decline.

From a valuation standpoint, NKE trades at a forward price-to-earnings ratio of 31X compared with the industry’s average of 27.72X.

The Zacks Consensus Estimate for NIKE’s fiscal 2026 EPS indicates a year-over-year decline of 28.7%, while that for fiscal 2027 suggests growth of 54.8%. The company’s EPS estimates for fiscal 2026 and 2027 have been southbound in the past 30 days.

NIKE currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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