Nike at a 12-Year Low or Lululemon at an 8-Year Low? Here's the Better Turnaround Stock for Deep Value Investors to Buy in July.

Nike (NYSE: NKE) is the largest activewear company in the world by far, but many smaller competitors have been gaining ground in taking it on. Lululemon Athletica (NASDAQ: LULU) was one of the original competitors that created a niche in the space, capturing market share and forever changing standard casual wear, but it's also struggling today.

Part of what's plaguing these companies is the environment. Inflation is making spending much harder for its regular customers, who are spending less or switching down, but the companies also made some recent missteps.

Both of these companies are making leadership changes as they try to make a recovery. Which is the better buy for value investors?

Image source: Nike.

The case for Nike

Nike is a powerhouse that's one of the largest apparel companies in the world of any kind, not just athletic wear. It has the highest brand power of any apparel brand in the world, according to Brand Finance's Brand Strength Index (BSI), and the second highest brand power of any kind of brand. It consistently takes the top spot in Piper Sandler's "Taking Stock With Teens" survey in both footwear and clothing.

This is all despite its recent struggles, lower sales, and dropping stock price. That's strong evidence of the ability to recover.

Nike has made some progress recently, with flat sales year over year in the 2026 fiscal third quarter (ended Feb. 28), whereas sales had declined as much as 10% in previous quarters. Management is still guiding for a decline for the full year.

Also, Nike is reversing its decision to cut ties with wholesalers and leaning into innovation in sport, two areas where it had taken ill-fated actions. It's made the most visible progress in the running segment, which was up 20% year over year in the third quarter, and it's using the success as a roadmap for its other franchises. Another win was the launch of Nike Mind, a neuroscience-based footwear line that sold out and has a 2 million-person waiting list.

Management believes it has identified its path to recovery, but given the challenging environment and the work required to make it happen, it will take some time.

Finally, in Nike's favor, it pays a growing dividend that yields 3.9% at the current price, and the company has not suspended the payout despite its struggles.

The case for Lululemon

Lululemon practically created the athleisure trend single-handedly with its breakout yoga pants, but several years later, it hasn't kept the innovation engine going. It missed trends and launched several products that baffled fans, and, like Nike's predicament, that opened the door for newcomers to steal market share.

Lululemon is still reporting sales increases, including a 4% year-over-year increase in the 2026 fiscal first quarter (ended May 3), but it's struggling with profitability and has lowered its full-year guidance. It's also dealing with the loss of confidence surrounding its founder, Chip Wilson, who started a proxy fight with the company, bringing lots of negative attention that management says affected sales.

The company has a new CEO scheduled to start in September, and it's in a kind of no-man's land until then, co-led by its CFO and chief commercial officer.

Lululemon's brightest spot right now is China, where business is still booming, and where Nike is struggling. Sales in China increased 30% year over year in the first quarter, although in the U.S., where Lululemon's business is much bigger, sales were down 4%.

The other edge Lululemon has on Nike is its price. Lululemon trades at a P/E ratio of 9, while Nike trades at 28 times trailing-12-month earnings. If you're looking for deep value, that's a huge discrepancy.

Which is the better value buy?

Nike is the clear winner in this contest. Its higher valuation implies more confidence. Investors really don't know where Lululemon is going right now; it doesn't have Nike's clout or brand power, which is why it's so cheap. Plus, Nike pays an excellent dividend, which provides great value right away.

Jennifer Saibil 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.