One of many extra disappointing holdings in my Shares and Shares Isa lately has been Nike (NYSE: NKE). The inventory has fallen 20% over the previous yr and is barely up 11% in 5 years.

That compares very poorly to the S&P 500‘s 84% return over the last half-decade.

The deadline for the current year’s ISA contributions is midnight on 5 April. Is that this an opportunity to purchase extra shares earlier than then? Or ought to I promote up and jog on? Let’s talk about.

Unbelievable model

The phrase ‘iconic’ will get bandied about rather a lot, however to me Nike is clearly such a model.

I used to be sporting Nike trainers a long time in the past. But I nonetheless couldn’t stroll 5 minutes out and about right now with out seeing that well-known swoosh on a chunk of cloth.

Puma, Ellesse, Reebok and others might come out and in of recognition, however Nike has remained on the prime.

Furthermore, the corporate nonetheless seems to have loads of alternative to develop gross sales in Asia and Latin America, the place rising middles lessons have extra to spend on premium sportswear.

Innovation points

Nonetheless, there’s a snag. Critics argue the agency is relying an excessive amount of on legacy merchandise like basketball footwear and has stopped innovating.

In Nike’s Q3 earnings name on 21 March, CEO John Donahoe admitted as a lot: “We need to make adjustments…we must drive a continuous flow of new product innovation“.

Meanwhile, it’s losing market share to newer brands like Hoka and On Running, as well as New Balance, which has surged its popularity.

Additionally, the company has been in the headlines recently regarding its redesign of the St George cross on the new England football kit. Even the Prime Minister waded into the row.

Here, it seems there was a little too much product innovation for some people’s liking!

While this storm should quickly blow over, the possibility that Nike has lost its edge is now a worry for me.

Tepid growth outlook

In Q3, which ended 29 February, the company reported $12.43bn in revenue, a 1% rise year on year.

Net profit of $1.17bn translated into earnings per share (EPS) of $0.77 per share. That was down from $0.79 a year earlier, though it would have been $0.98 but for restructuring charges.

Basically, Nike is cost-cutting to preserve profits and margins, but a lack of growth has become a problem. Sales in China are sluggish. Even management admitted that the company “is not performing to our potential”.

Trying forward, Nike sees a low-single-digits income decline in H1 of FY25 (which begins in June). This displays weak world shopper sentiment. So there’s not a lot to get enthusiastic about.

My transfer

If the inventory was down within the 15-18 price-to-earnings vary, I’d think about shopping for extra shares. This stays a world-class firm, in any case.

Nonetheless, Nike is buying and selling at 27 occasions earnings. That’s a development inventory a number of for a agency that has all-but-stopped rising income (no less than for now). And that worries me.

Granted, there’s a particularly well-covered dividend yield of 1.6%, however that’s nothing to write down dwelling about. 1 / 4 of the FTSE 100 is yielding over 5% proper now.

On reflection, I’m placing the inventory within the penalty field. I’ll anticipate This fall ends in June and decide then.