Nike and Lululemon Both Hit Multi-Year Lows in September. Which Stock Is Best Positioned to Make a Comeback?

Nike (NYSE: NKE) and Lululemon (NASDAQ: LULU) were both once considered resilient stocks in the crowded athletic apparel market. Nike is the world's largest athletic footwear maker, while Lululemon was one of the fastest-growing yoga and athleisure apparel brands.

But this month, both stocks sank to their multi-year lows. Lululemon, which reached a record high of $511.29 per share in Dec. 2023, now trades at $96 per share. Nike, which closed at an all-time high of $161.91 per share in Nov. 2021, has dropped to $36. Let's see why these two stocks collapsed -- and which one has a better shot at a comeback.

Image source: Getty Images.

What happened to Nike?

Nike's revenue growth was flat in fiscal 2024 (which ended in May 2024), fell 10% in fiscal 2025, and was flat again in fiscal 2026. That slowdown can be attributed to its weak sales in North America, which offset its overseas growth, and to its decision to cut ties with wholesale retailers to expand its direct-to-consumer business through its first-party stores and e-commerce platforms.

As Nike removed its shoes from wholesale retailers, its competitors -- including Deckers' Hoka, New Balance, and On Holding -- eagerly grabbed that shelf space and expanded their shares of the running and lifestyle sneaker markets. Nike also relied too heavily on retro classics (like the Air Force 1, Dunk, and Air Jordan) instead of creating fresh, performance-oriented footwear to stay ahead of its challengers.

To sell more shoes, Nike relied more heavily on markdowns -- which reduced its gross margin from 44.7% in fiscal 2024 to 43.2% in fiscal 2026. Its EPS plummeted from $3.73 in fiscal 2024 to $2.10 in fiscal 2026. CEO Elliot Hill, who took the helm in Oct. 2024, expects fiscal 2027 to be a "reset" year in which the company will sacrifice its sales growth to stabilize its business.

Analysts expect Nike's revenue and EPS to decline 2% and 19%, respectively, in fiscal 2027. It's rebuilding its relationships with wholesale retailers, clearing out its inventory, and developing new, higher-performance shoes, but it still needs to overcome many near-term challenges.

What happened to Lululemon?

Lululemon was built from the ground up as a direct-to-consumer brand through its own e-commerce website and brick-and-mortar stores, so it didn't face the same wholesale-retailer issues as Nike. However, Lululemon's top-line growth is also decelerating.

In fiscal 2023 (which ended in Feb. 2023), Lululemon's revenue rose 19% -- but only grew 10% in fiscal 2024 and 5% in fiscal 2025. Its gross margin also shrank from 58.3% in fiscal 2023 to 56.6% in fiscal 2025, but its EPS rose from $12.20 to $13.26 as it bought back more shares.

That slowdown was caused by its soft sales of women's apparel in North America, where it faces fierce competition from smaller brands like Alo Yoga and Vuori. Like Nike, the weakness of Lululemon's North American business offset its stronger overseas growth.

Lululemon also relied on markdowns to boost its sales. That strategy diluted its premium appeal and exacerbated the pressure on its gross margins -- which were already being squeezed by the Trump Administration's tariffs on products manufactured in Asia.

Lululemon brought in a new CEO, Heidi O'Neill, to lead its turnaround efforts this year. However, O'Neill's prior experience as a Nike executive doesn't inspire much confidence in a quick recovery. Lululemon wants to expand its apparel lineup (with more loose-fitting, relaxed apparel) and launch new marketing campaigns to stabilize sales. Yet analysts still expect its revenue and EPS to decline by 6% and 27%, respectively, in fiscal 2027.

Which stock has a better shot at a comeback?

Nike and Lululemon both face formidable near-term challenges. However, Nike still trades at 21 times this year's earnings while Lululemon looks significantly cheaper at 10 times this year's earnings. Therefore, I think Lululemon has less downside than Nike.

Lululemon still has a lot of work to do, but any positive news could drive its stock much higher. Meanwhile, Nike hasn't hit bargain-bin valuations yet because investors are still paying a premium for its brand recognition and past performance. So while I wouldn't buy Lululemon yet, I think it has a clear shot at outperforming its larger competitor through the end of this year.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deckers Outdoor, Nike, and On Holding. The Motley Fool recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.