Gasoline Prices Are Still High, but This Inflation Reading Could Be Even More Worrisome for Nike Stock.

Nike could be pinched if producer prices stay elevated for an extended period.

The sportswear stock is already in a slump, and tariffs aren't helping matters.

Inflation is often a drag on equities, but it can really highlight the vulnerabilities of select consumer discretionary stocks . After all, if prices rise too quickly, shoppers respond by altering their spending habits, and many of those changes involve non-essential spending.

Then there's the other kind of inflation. That is the form companies deal with themselves. It's measured by the Producer Price Index (PPI), which showed potentially alarming signs for companies like Nike (NYSE: NKE) in May. Last month, the PPI surged 6.5% year over year, signaling potentially worrisome signs for input-cost-sensitive corporations such as Nike.

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Nike stock is beset by tariffs and rising producer prices. Image source: Getty Images.

The May PPI reading arrived with shares of the athletic apparel giant mired in a bear market. Nike stock is off nearly 28% this year, and as of June 11, it resides some 43% below its 52-week high. Investors are right to be leery of any stock sporting those bearish percentages, and that caution should be amplified with Nike because there's no telling when producer prices will trend in the company's favor.

One need not be a professional economist to understand why high input costs are drags on Nike. It's all about margins. The more it costs the company to produce sneakers, shirts, and other athletic gear, the more it needs to pass some of those costs on to consumers. If shoppers don't bite, margins languish.