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S&P Global Ratings has downgraded Nike’s credit rating from ‘AA-’ to ‘A+’ due to growing concerns over shrinking profit margins, exposure to rising import tariffs, and the slow pace of its business turnaround. This downgrade follows a rocky period of transition for the company, which included the sudden exit of former CEO John Donahoe in 2024 and a new strategic direction under current CEO Elliott Hill.
Despite the downgrade, S&P has kept Nike’s outlook “stable.” That means the agency believes Nike will keep its debt levels under control in the short term, even though its earnings have taken a hit. Specifically, Nike’s adjusted leverage (a measure of debt vs. earnings) increased from just 0.2x to around 0.5x in its 2025 fiscal year. This wasn’t because Nike took on more debt, but because its profits declined.
Several factors are dragging down Nike’s profitability. Internally, the company has struggled with execution. Externally, rising tariffs on footwear imports from China and Vietnam could cost Nike up to $1 billion, especially during the first half of fiscal 2026. These added costs are putting pressure on its already tight profit margins.
In response, Nike is making some big changes. It plans to reduce how much footwear it imports from China, bringing that number down to the high single digits by 2026. It’s also raising prices on certain products starting in fall 2025. These moves are part of a broader recovery plan called “Win Now,” which focuses on rebuilding Nike’s market position by improving its product mix and reworking how it sells, especially in key markets like the U.S., China, the U.K., and five global cities.
Although Nike is still a giant in the athletic wear world, it’s facing stiff competition. Newer, faster-growing brands like Hoka, OnRunning, and Lululemon have gained ground, especially while Nike pulled back from some of its traditional retail partnerships.
Nike is also trying to clean up its inventory situation. Its sales are expected to fall in the first quarter of fiscal 2026, and profit margins could drop by as much as 4.25 percentage points due to clearance sales and weak online demand.
S&P says Nike’s credit rating could improve again—but only if the company can bounce back strongly and consistently. That would mean better profits, a stronger market position, and renewed brand relevance. Until then, Nike’s rating remains in the middle of the investment-grade range.