Nike is aiming to regain its former glory after announcing the appointment of company veteran Elliott Hill as its new CEO. The announcement, made on Thursday, led to a significant stock increase of 8% in after-hours trading, with shares staying elevated at the start of Friday. Hill takes over from the retiring John Donahoe, whose leadership, although initially promising, faced challenges from shifting competition and declining sales due to an ambitious direct-selling strategy.
Donahoe was credited with guiding Nike through the challenges of the COVID-19 pandemic, which was reflected in a substantial increase in the company’s share price during his tenure. Since Donahoe assumed the role in January 2020, Nike’s stock more than doubled, reaching a peak of $177.51 in November 2021. However, the stock has faced a 24% drop year-to-date, settling just above $80 at the close on Thursday, before rising to just below $86 on Friday morning.
Prior to his appointment, Donahoe, who previously led eBay and ServiceNow, focused on modernizing Nike’s operations by eliminating middlemen and reducing retail partnerships. Initially, this strategy proved successful, resulting in record sales of $51 billion last year. Despite this, competitors like Adidas, Puma, and emerging brands such as Brooks and Hoka have started to gain market share as Nike struggled to keep up with consumer expectations for new products.
During a recent earnings call, Nike projected a 10% decline in sales for the upcoming quarter, which was a stark contrast to the anticipated 3.2% drop predicted by analysts. Additionally, the company’s plans for $2 billion in cost-cutting, including a 2% workforce reduction, have not successfully mitigated the downturn, leading to concerns about talent retention at the company known for its innovative spirit.
However, investors are hopeful that Hill can lead a turnaround. With over 30 years of experience at Nike, starting as an intern in the 1980s and most recently serving as president of the consumer and marketplace division, analysts believe Hill’s return will bring a fresh perspective needed for strategic advancements. Lorraine Hutchinson, a managing director and retail analyst at Bank of America, expressed confidence that Hill’s extensive history within the company could rejuvenate innovation and strengthen wholesale relationships.
Phil Knight, Nike’s co-founder and chairman emeritus, echoed these sentiments, emphasizing the importance of Hill’s understanding of the company. Nike has committed to compensating Hill with a $27 million package to help guide the brand back to a successful trajectory. Shareholders are optimistic for a positive return on this investment.