Credit rating agency Moody's Ratings has downgraded several of global footwear and apparel retailer Nike's debt ratings. In downgrading Nike's senior unsecured debt by one notch on Wednesday, Moody's analysts cited cost pressures from higher tariffs among other factors in the agency's decision.
The rating agency simultaneously shifted its outlook on Nike's still high-grade ratings from negative to stable. Nike has experienced stagnant financial performance recently as newer brands such as On and Hoka have chipped away at the sportswear juggernaut's market share. The company's revenue slipped by 10% in its fiscal 2025, while its earnings before interest and taxes declined 42%, according to Moody's. It has revamped its product lineups while clearing out excess products in its lifestyle-focused franchise, Moody's analysts noted, Reuters reported.
Moody's expects Nike's profit margins will recover over time, but slowly due to the impact of tariffs, as well as Nike's cautious discretionary spending and heightened market competition from new and established rivals. These and other factors should "result in diminished cash flow and higher leverage compared to (Nike's) historical credit profile," Moody's Wednesday report noted.
Nike's cash flow generation should "remain constrained by higher capital expenditures and its sizable dividend, which has increased over the past few years," the report added.
The analysts forecast Nike's adjusted debt-to-Ebitda to increase to 2.5x in fiscal 2026 before falling to mid-1x in fiscal 2027.
