Three Footwear Stocks Trading at Post-Pandemic Lows

Nike's core problem is not the business. It is the pace of direct-to-consumer mix change. Management shifted aggressively to DTC in 2020 to 2022, pulling back from wholesale partners. That hurt retail relationships and left open shelf space that Adidas, On, and Hoka rushed into.

The correction is underway. Nike's new leadership has reversed the DTC-exclusive strategy and reinvested in wholesale. That is a 12 to 18-month rebuild, but the operating leverage is real. Nike still generates $6 billion of free cash flow annually, carries a net cash balance sheet, and pays a 2.2% dividend.

At current prices, the stock trades at roughly 19x forward earnings, below the ten-year median of 28x. The setup rhymes with 2016, when Under Armour's rise caused a similar temporary derating at Nike. That derating reversed over two years as Nike's product cadence recovered.

The Risk Desk view: buyers below $70, take profits above $100.

Adidas is the cleanest reversion setup in the sector. The Yeezy write-down in 2023 cost roughly EUR 600 million and removed a profit stream that had accounted for 40% of operating income. Management has spent 24 months rebuilding the product portfolio, and the numbers are starting to show the recovery.

Revenue grew 12% in 2024 organic. Gross margin expanded 240 basis points. Operating margin is on track to re-cross 10% in 2025 for the first time since 2021. Inventory is cleaner than it has been in three years. The Samba and Gazelle retro cycle has been a hit, and the Terrex outdoor line is the fastest-growing segment.

The stock trades at 19x forward earnings and 11x EV/EBITDA. Historical averages are closer to 22x and 15x respectively. The multiple compression leaves room for re-rating even if growth merely normalises at mid-single digits.

The Risk Desk view: buyers on any pullback. The clean balance sheet and improving operating trend tilt the reward-risk positive.

On Holding is the opposite of the other two. The stock trades at 38x forward earnings on growth that has decelerated from 46% in 2023 to an expected 18% in 2025. The multiple is still priced for the earlier growth rate.

The core problem is that On is a single-product company running into the growth deceleration that every premium footwear brand eventually encounters. Hoka, owned by Deckers, is facing a similar dynamic and has seen its multiple compress from 35x to 22x. On has not yet.

Gross margin is strong (62%), brand heat is still elevated, and the apparel extension is working. Those are positives. But at 38x forward earnings, the stock needs every quarter to beat, and historically that kind of multiple on a decelerating growth rate is the most fragile setup in retail.

The Risk Desk view: avoid. Even fair value, which we place at 25 to 28x, implies 30% downside from current levels. The risk-reward is skewed to the wrong side.

Branded footwear has a recurring pattern. A premium brand rides an innovation cycle for 6 to 8 years. Growth decelerates. The multiple compresses from 35x to 20x. The brand either reinvents (Nike in 2016, Adidas in 2023) or gets overtaken by the next entrant. The cycle runs continuously, and there are always one to two names in each phase.

Currently, Nike sits in the reinvention phase, Adidas in the early recovery phase, and On in the late-cycle growth phase. Historical base rates from the last three cycles of this pattern suggest the recovery names deliver 60 to 80% returns over 24 months, the late-cycle names give back 30 to 50%.

Allbirds sat in a fourth phase, called distress, before the rebrand attempted to short-circuit the cycle. Distress names historically resolve one of three ways: strategic acquisition (Keds, Stride Rite), managed decline (Crocs before its turnaround), or bankruptcy (Rockport). A narrative-driven pivot to an unrelated industry is not on the historical menu.