Better Stock to Buy Right Now: Nike vs. Lululemon

Key Points
Nike's incredible brand strength gives the company an invaluable asset to lean on as it attempts to stabilize revenue and profit trends.
Lululemon's impressive margins aren't encouraging investors concerned about the notable sales slowdown.
Both consumer discretionary stocks have gotten hammered, so their valuations are compelling.
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Investors searching far and wide for discount opportunities might be in luck. Nike (NYSE: NKE), which has long been the dominant force in the worldwide sportswear market, has seen its shares fall 69% from their peak (as of March 17). There's also athleisure pioneer Lululemon Athletica (NASDAQ: LULU), whose shares are also 69% below their all-time high right now.
Looking at both of these consumer discretionary stocks, which is the better one to buy right now?
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Nike's brand is powerful, but a turnaround is testing investors' patience
The athletes that Nike endorses seem to always be in winning positions on the playing field. The company, however, has been losing in recent years. Nike is projected to generate $46.7 billion in revenue in fiscal 2026 (ending on May 31), according to consensus views. This would represent a 9% decline compared to two years before.
Under CEO Elliott Hill, Nike has been relentlessly focused on turning the company around. Previously, it alienated retailing partners and depended too much on classic footwear designs. The strategic priorities now rest on what seem like obvious areas, including product innovation, striking the right distribution balance, and marketing impact.
Nike has its work cut out for it. It needs to find ways to stand out in a competitive industry. Consumer tastes are always changing, so merchandise novelty is a non-negotiable. This turnaround period is the perfect time for Nike to bounce back better than ever.
But there's no tangible risk that Nike will fall by the wayside. Its global presence and unmatched product distribution are hard for rivals to compete with. What's more, the company's brand is second to none in the industry. This is supported by a sizable marketing budget. Called demand creation expense, Nike plans to spend 10% of its revenue on these branding efforts. Smaller rivals don't have these kinds of resources.
Lululemon's growth has slowed, even though its profits remain impressive
Lululemon also isn't performing at its best right now. The U.S., which is its most important market, saw sales dip 6% in the latest fiscal quarter (the fourth quarter of fiscal year 2025, ended Feb. 1). Some of this could certainly be blamed on the macro environment. But Lululemon isn't helping its case. It has struggled on the creativity front to introduce fresh merchandise, a criticism founder Chip Wilson has expressed.
Between fiscal 2025 and fiscal 2028, consensus analyst estimates call for revenue to increase at a compound annual rate of just 4.8%. This would demonstrate a notable slowdown from prior years, a forecast the market doesn't like.
Adding to the pessimism is Lululemon's recent leadership pivot, which adds a lot of uncertainty. Calvin McDonald, who was the CEO since 2018, stepped down at the end of January. The business is still figuring out who will be its next CEO. But whoever this person is will have work to do in order to excel in the areas McDonald didn't, namely boosting growth, driving product innovation, and raising the share price.
Nonetheless, at a high level, the financials don't look as bad as Nike's. Overall company revenue was up 4.8% in fiscal 2025. And China saw a 29% sales surge. Lululemon's profitability is also impressive, as it registered a 22.3% operating margin in Q4.
Expectations have gotten extremely low
Compared to Nike, Lululemon is arguably in a stronger position right now. The athleisure business continues to grow revenue at a solid clip, something Nike has struggled to do. Lululemon's profitability also outshines Nike's bottom line.
Add this perspective to Lululemon's valuation as well. Its shares currently trade at a price-to-sales (P/S) ratio of 1.7, which is the lowest level in the past 16 years. It's hard to ignore this setup.
Nike, on the other hand, also looks discounted. Its P/S multiple of 1.8 is near the lowest it's been in 13 years. While the financials have been weak, it still has a brand position that dominates on a global stage, a position Lululemon will never achieve.
Investors willing to navigate through heightened uncertainty and accept greater risk might find both of these stocks compelling additions to a portfolio. Cheap starting valuations, coupled with the possibility that earnings will stabilize and return to growth, can result in winning returns if things go right.
Just remember to look at these two stocks as part of a diversified portfolio, given that they'd both provide exposure to the same end markets.
Should you buy stock in Nike right now?
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Nike. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.