Nike shares fall as EEOC opens discrimination probe over DEI programs

Nike shares declined in Wednesday trading as the sportswear giant faces a federal civil rights investigation examining whether its diversity, equity and inclusion programs illegally discriminate against white workers.

The Equal Employment Opportunity Commission filed a subpoena enforcement action against Nike in federal court after the company failed to voluntarily provide documents requested by the agency, according to the EEOC filing. The investigation focuses on allegations of systemic disparate treatment against white employees, job applicants and training program participants in hiring, promotion, demotion and separation decisions, including layoffs.

The probe encompasses 16 specific programs that allegedly offered race-restricted mentoring, leadership or career development opportunities. The EEOC is seeking data extending back to 2018, including criteria for employee layoffs, how the company tracks and uses worker race and ethnicity data—including its role in executive compensation—and detailed information about the restricted programs.

Nike shares were trading 5.4% lower at $64.22, extending a recent decline that has left the stock below its 200-day moving average of $66.92. The drop erased roughly $4.9 billion in market capitalization from the Beaverton, Oregon-based company, which now values the business at approximately $90.2 billion. The stock has fallen more than 20% from its 52-week high of $80.53 reached last year.

The investigation represents a significant escalation in legal scrutiny of corporate DEI initiatives, which have become increasingly polarizing in corporate America. Nike, long regarded as a progressive leader on social issues and workplace diversity, now finds its employment practices under federal examination just as companies nationwide face pressure to reassess diversity programs following Supreme Court rulings on affirmative action in higher education.

"This investigation examines whether Nike's diversity, equity and inclusion initiatives, including its 2025 Targets, are resulting in systemic discrimination against white employees," the EEOC stated in its court filing. The agency moved to enforce the subpoena after Nike declined to produce all requested information voluntarily.

The regulatory headwind comes at a challenging time for Nike financially. The company reported quarterly earnings growth down 32.1% year-over-year in its most recent period, with revenue growth slowing to just 0.6%. Analysts have maintained a generally positive outlook on the stock—of 39 analysts covering Nike, 25 rate it a buy or strong buy, while 12 recommend hold—but the consensus target price of $76.34 suggests limited upside from current levels.

Nike's elevated valuation metrics, including a trailing price-to-earnings ratio of 35.63, leave the stock vulnerable to negative developments. The company's profit margin of 5.4% and operating margin of 8.1% reflect the competitive pressures in the athletic footwear and apparel market, where Nike faces intense rivalry from Adidas, Under Armour and emerging direct-to-consumer brands.

The EEOC investigation could force Nike to overhaul its internal diversity programs or face potential litigation and penalties. More broadly, the case may establish precedent for how federal employment law applies to corporate DEI initiatives in the private sector, potentially affecting hiring and promotion practices across Corporate America.

Institutional investors own 83.2% of Nike's outstanding shares, meaning large asset managers will need to weigh the regulatory and reputational risks against their governance policies that typically support diversity initiatives. The company's next earnings report and any public statements about its DEI programs could serve as key catalysts for the stock in coming weeks.

Nike did not immediately respond to requests for comment on the investigation or its plans for addressing the EEOC subpoena.