Nike Inc (NYSE:NKE) shares are falling Monday as S&P Global Ratings downgraded its credit rating on Nike to A from A+, with a negative outlook. Here’s what you should know.
Nike stock is trading at depressed levels. Where are NKE shares going?
S&P Downgrades Nike’s Credit Rating S&P cut Nike’s long-term issuer credit rating and its unsecured debt ratings to A from A+. S&P now sees the recovery taking much longer, especially in China and in the Nike sportswear and Jordan lines.
Those lines generate more than 60% of revenue, and wholesalers are sitting on excess inventory. S&P projects far weaker revenue, profit and cash flow over the next two years than it assumed before.
Management unveiled a cost-cutting program that will add $1 billion in restructuring charges over the next three years. S&P warned that simultaneous leadership and board changes could slow Nike’s push to rebuild profit and cash flow.
China is a major pressure point. Revenue there dropped 26% in the first fiscal quarter, and S&P forecasts a fall of about 30% for fiscal 2027.
S&P said heavy discounting, fierce competition, poor digital execution and too little culturally relevant innovation contributed to the decline. 4 billion in liquidity to cushion that burn.
It expects Nike to suspend share repurchases and delay growth-related capital spending. The negative outlook means S&P could cut the rating again within 12 to 24 months.
That would happen if Nike shows no progress stabilizing the business or if free operating cash flow falls below 25% of debt. A stable outlook would need stabilization progress, cash flow at 25% of debt or more, restored brand relevance and recaptured market share.
72 at the time of publication on Monday. The stock is well off its lows for the session, according to Benzinga Pro.
Lululemon Athletica Inc (NASDAQ:LULU), a direct peer of Nike, is also trading lower Monday. 38 at the time of publication on Monday.
The stock is trading at a new 52-week low.
