J.P. Morgan downgraded Nike, Inc. from “Neutral” to “Underweight.” Analyst Matthew Boss believes that Wall Street is “mis-modeled” on the athletic giant, believing the financial headwinds will drag down profitability through fiscal 2028. He highlighted top-line pressures from the brand’s China reset, recent North American store closures and heightened competition from challenger brands.
In a note, Boss, who also lowered his price target on Nike to $40 from $47, wrote that based on his team’s recent “access” to management and by looking at regulatory filings, the financial impacts of Nike’s Win Now strategy made through the end of the current calendar year “will linger” and impact the company’s profit and loss statement in the second half of 2027 and into fiscal 2028.
He noted that Nike’s management’s recent move to reset China on July 21 and news of store closings in North America over the month of July “supports recent filings language,” including in Nike’s 10K that was issued on July 15. Nike wrote in the report, “Our reportable operating segments are at different stages of progress, and we expect to complete these actions by the end of December 2026. The timing of financial impacts has varied and will continue to vary by segment. North America has made the most progress against these actions, while Greater China and Converse will take more time.”
Boss called out the major hit he expects Nike to absorb from its decision to reset China.
Nike announced last month that starting in 2027, its digital marketplace in China will be anchored by an official Nike flagship experiences on Tmall, JD.com and Douyin, alongside Nike.com.cn and the Nike App, while partner-operated online storefronts will transition out of selling Nike product.
“One rationale behind the decision—management is focused on creating digital ‘flagship’ experiences for the Nike brand to serve as the single elevated destination for Nike within these ecosystems, with clearer product presentation, stronger storytelling and more connected consumer journeys,” Boss wrote in his note.
He estimated, however, that Nike will face a $1 billion revenue headwind in China due to this decision. That’s around 20 percent of Nike’s fiscal 2026 Greater China revenue, according to the firm. J.P. Morgan believes this substantial hit to revenue will be due to Nike’s online sales ending entirely at major sportswear retailers Topsports and Pou Sheng.
Boss noted that Nike has lost 590 basis points in market share in China since 2019 to 12.9 percent, while local brands have gained market share. This is represented by a sharp deceleration in Nike’s China trajectory, moving from 1 percent revenue CAGR to a negative 16 percent CAGR between FY25 and FY28.
Boss wrote, “This dynamic is not explained by a broad-based rejection of global brands, as other global players have delivered strong China growth over the last 12 months,” Boss added. Pre-pandemic, China represented 25 percent of Nike’s segment profit and more than 38 percent operating margin. However, as of 2025, China represents just 12 percent of segment profit with margins down more than 1,000 basis points to 21.9 percent.
Boss further wrote that the company’s move to close many stores across the U.S. could weigh on North American financials until the store closures are fully annualized, eliminating year-over-year comparison lags and ongoing lost baseline sales.
Boss estimates Nike’s current store directory in the U.S. shows 252 Nike Brand stores today (in-line and factory stores), which compares to 287 Nike brand stores reported in the 10-K filing at FY26-end, implying that 35 Nike brand store closures have occurred in the U.S. Also including Converse’s store’s, Nike’s U.S. store -10 percent reduction YOY (or a -18 percent 2-year stacked store count consolidation). Boss wrote, “To this point, we see forward revenue headwinds to N. America until the store closures are fully annualized (i.e. in July 2027 or mid-1Q28), representing another example of ‘Win Now’ actions that carry financial impact extending beyond CY26-end.”
Newer competition was also cited as a headwind with “ankle biters” like On Holdings (ONON), Hoka (DECK), and Brooks gaining market share to Nike’s detriment. This “fragmented share set” has moved from less than 10 percent market share in 2019 to roughly 17 percent today, closing the gap to Nike’s 19 percent share.
“This compresses Nike’s former >10 point share advantage versus the cohort to roughly 200 basis points, indicating that smaller brands are now operating at scale rather than at the margin,” Boss writes, adding that the “central question is no longer whether niche brands can grow, but whether consumer behavior has structurally shifted toward lower brand loyalty and higher multi-brand trial, making sherare recapture a harder, more durable challenge.”
Besides the downgrade and price target cut, Boss lowered his FY27 EPS estimate to $1.55 versus the consensus estimates of $1.72 and the second half 2027 revenue outlook to a 4.6 percent decline year-over-year. His FY28 EPS estimate moves down to $1.72 versus analysts’ consensus of $2.15.
Image courtesy Nike
