Nike's Growth Over the Past 5 Years Has Been Shockingly Bad, and Its Earnings Are Even Worse

Nike (NYSE: NKE) has been an iconic footwear and apparel brand for decades. But in recent years, it's been running into challenges in growing its business. Under a new CEO, the business is in the midst of a turnaround, aiming to rebuild relationships with key partners and get back to growth. However, it hasn't been an easy path by any means.

Recently, the company reported its latest earnings numbers. At first glance, they didn't look too bad, and revenue was comparable to where it was a year ago. However, it's when you look at the bigger picture and compare it to where Nike was five years ago, that you start to see how underwhelming its results really are.

Image source: Getty Images.

Nike's revenue has risen by just 9% in five years

On March 31, Nike reported its quarterly results for the period ending Feb. 28. Revenue of $11.3 billion was flat and didn't look all that bad compared to the previous year. However, five years ago, during the same period, its revenue was $10.4 billion, which means that since then, its revenue has risen by roughly just 9%. That averages out to a compounded annual growth rate of only 1.7%.

It's a paltry rate, and it would be hard to consider Nike a growth stock with those kinds of results. While it experienced strong demand amid the pandemic and consumers having more disposable income, its growth story has quickly deteriorated in the past five years, as is evident in the chart below.

NKE Revenue (Quarterly YoY Growth) data by YCharts

What may be even more concerning is Nike's bottom line. This past quarter, its earnings totaled $520 million, which were down 35% year over year. And five years ago, its net income was over $1.4 billion; it has declined 64% since then.

The company still has a long way to go in turning its business around

For investors, it can be misleading to look at just how Nike has done during the past quarter. It fails to take into account the bigger picture and the longer overall trends. Although in its most recent results, its top line appears to be stabilizing, it's important to remember that Nike is also going up against softer numbers from a year ago.

If you're looking to buy Nike stock, you'll need to be extremely patient with it, as turnaround efforts can take a great deal of time. While Nike is optimistic that it's on the right path, the longer-term results tell a different story. This year, the stock is already down 31%, and while its valuation might look attractive to bargain hunters, this is also a much riskier investment than it has been in the past.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.