Nike Inc. (NKE), one of the world’s leading footwear brands, has reported year-over-year sales declines for four consecutive quarters, prompting concerns about its long-term growth sustainability. In response, the company announced a two-pronged strategy on May 22: resuming direct sales through Amazon and implementing targeted price increases to enhance profit margins.
While these initiatives may provide near-term support, I maintain a bearish outlook on Nike’s stock, as I believe the current valuation does not fully reflect the key risks the company continues to face.
Nike Goes Back to Amazon
Although I am bearish on Nike, I believe the decision to sell directly on Amazon in the U.S. will help the footwear giant’s sales in the short term. A survey conducted by AlixPartners and Footwear Distributors & Retailers of America in 2024 found that more than a third of consumers start their footwear search on Amazon. Nike’s return to Amazon is likely to be completed before the end of this month. In line with the partnership terms, Amazon has notified third-party sellers that they will not be allowed to sell certain Nike products, starting on July 19.
Over the past five years, many of Nike’s direct competitors have maintained a strong presence on Amazon, while Nike’s absence from the platform has contributed to market share losses. Looking ahead, Nike’s renewed partnership with Amazon should improve its competitive positioning.
Nike (NKE) Revenue by Geography
Selling directly on Amazon also allows Nike greater control over its brand presentation, mitigating the negative impact of third-party sellers who have shaped the brand’s image on the platform, often to its detriment. Moreover, leveraging Amazon’s extensive U.S. reach—estimated at approximately 230 million active users—could help Nike strengthen its market presence and build a more resilient business profile.
That said, investors should be mindful of potential risks associated with this strategy. Chief among them is margin pressure, as Amazon’s seller fees could weigh on Nike’s profitability. There is also a risk of channel cannibalization; a stronger presence on Amazon could divert traffic away from Nike’s e-commerce platform. If that occurs, Nike may lose valuable direct-to-consumer data, which could hinder the effectiveness of its marketing and customer engagement efforts over the long term.
Price Hikes May Not Boost Gross Margins
As part of its strategy to reignite growth, Nike plans to implement selective price increases across certain product categories. According to multiple media sources, footwear priced above $150 will see a $10 increase, while those in the $100–$150 range will rise by $5. Adult apparel is also expected to see price adjustments ranging from $2 to $10, depending on the retail price.
Notably, Nike will exempt several key categories from these hikes, including Air Force 1 sneakers, children’s footwear, Michael Jordan-branded apparel, and all items priced under $100. This approach indicates that Nike strategically targets product segments with relatively low price elasticity, where stable sales volumes are likely to sustain revenue growth despite higher prices.
Nike (NKE) revenue, earnings and profit margin history
The planned price increases appear justified in light of anticipated import cost pressures stemming from new tariffs. The degree to which these hikes will bolster gross margins depends largely on the company’s ability to maintain stable sales volumes and the overall economic impact of the tariffs. Nike’s gross margins have faced downward pressure in recent years, falling to 41.5% in Q3 FY2025 from 46% in FY2022. Key factors contributing to this decline include increased inventory write-downs, higher discounting to attract customers to Nike’s direct-to-consumer channels, such as its website, and rising input costs.
In theory, Nike’s targeted price increases could enhance gross margins, provided sales volumes remain stable or decline only slightly. However, the implementation of new tariffs presents significant challenges to this strategy. According to UBS estimates, proposed tariffs on imports from Vietnam, which account for nearly half of Nike’s footwear production, would necessitate substantially larger price hikes for the company to preserve its gross margin levels. Conversely, Morningstar analysts suggest that raising prices by more than 10% could severely impact sales volumes, making such increases difficult to sustain without compromising demand.
Is Nike Stock a Buy or Sell?
On Wall Street, NKE stock carries a Moderate Buy consensus rating based on 14 Buy, 15 Hold, and zero Sell ratings over the past three months. NKE’s average stock price target of $76.75 implies approximately 28% upside potential over the next twelve months.
Notably, several analysts who have recently expressed caution on Nike’s stock appear encouraged by the company’s decision to re-enter the Amazon marketplace. For example, Morgan Stanley analyst Alexandra Straton highlighted that direct sales on Amazon represent a clear positive, potentially adding $300 million to $500 million in incremental annual revenue.
Similarly, HSBC analyst Erwan Rambourg views Nike’s return to Amazon as a favorable catalyst, though he expressed concerns regarding the company’s innovation pipeline. Analysts Sam Poser of Williams Trading and Brian Nagel of Oppenheimer also support this strategic move.
Nike’s Amazon Return Boosts Revenue as Valuation Concerns Persist
While Nike’s return to Amazon is a positive development, I remain cautious on the stock due to its elevated valuation, with a forward P/E exceeding 28. Although the company’s five-year average forward P/E is around 31, this period included above-average growth, such as the 19% year-over-year revenue increase in Fiscal 2021, driven by post-pandemic recovery. Given the recent decline in revenue, I anticipate a potential valuation re-rating in the near term.
Nike’s decision to resume direct sales on Amazon in the U.S. is a strategic move likely to enhance short-term revenue. However, planned price increases may not translate into margin expansion, as the company faces rising import tariffs alongside the risk of reduced sales volumes. Given its current elevated valuation, Nike offers a limited margin of safety for investors.
