NKE
S&P just tapped the brakes
Nike woke up to a fresh headache: S&P Global Ratings downgraded the company’s long-term issuer and unsecured debt ratings to A from A+ and kept the outlook negative. In plain English, the rating agency is saying the comeback story is taking longer than hoped — and the bill for that wait is getting bigger.
What’s weighing Nike down?
The culprit list reads like a bad quarter’s greatest hits:
- China remains a pressure point, with revenue there down 26% in the first fiscal quarter and S&P expecting more pain ahead.
- Nike’s sportswear and Jordan lines are still under strain, even though they account for more than 60% of revenue.
- Wholesalers are sitting on excess inventory, which means more discounting and less pricing power.
- S&P also flagged poor digital execution and weak culturally relevant innovation — agency-speak for “the brand has some work to do.”
Why investors should care
S&P thinks Nike could burn about $1.2 billion a year for the next two to three years after dividends, while leverage climbs and free cash flow gets squeezed. The agency also expects Nike to suspend share repurchases and slow growth capex, which is basically corporate code for “tighten the belt and put the buyback candy away.”
Nike has said it will take on $1 billion in restructuring charges over the next three years, and S&P warned that leadership and board changes could slow the turnaround even more. Big picture: the stock can still rally on vibes, but credit ratings tend to care more about cash flow than vibes.