Nike Inc. shares jumped on Friday as investors responded positively to a shake-up at the top of the sneaker giant’s leadership, with investors hoping new CEO Elliott Hill can turn around the stock’s fortunes under current leader John Donahoe.
Nike CEO John Donahoe is set to step down next month.
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Key points
- Nike It was announced Nike announced Thursday afternoon that Hill, who retired as the company’s president of commercial and marketing operations in 2020, will replace Donahoe, who joined Nike as CEO in January 2020, effective Oct. 14.
- “This highly anticipated leadership change will inject a much-needed sense of urgency” into Nike, Deutsche Bank analyst Christina Katai noted in a note to clients, referring to the prolonged struggles Nike shares have endured under Donahoe as earnings growth has stalled.
- The market agreed with Katai’s assessment, with Nike shares rising about 8.7% to $88 on Friday, their highest intraday price since June 27, and closing up 6.9%.
- This is the biggest gain for Nike shares since November 2022, although the shares remain more than 50% below their 2021 peak.
- Hill will oversee Nike’s “efforts to reinvent, revitalize wholesale relationships and rebuild sales,” said Bank of America analyst Lauren Hutchinson.
big number
-16.5%. That’s how much Nike stock has returned to investors since Donahoe took over through Thursday’s close, compared with an 87.3% return for the S&P 500, according to FactSet data, when taking into account dividends. It’s also been a downturn for rivals like Adidas (-26.6% return over the period) and Lululemon (10.4%).
What went wrong under Donahue?
The end of Donahoe’s tenure as Nike CEO, which followed stints as the top executive at software company ServiceNow and online resale platform eBay, coincides with a dismal outlook for Nike in its fiscal year ending in May 2025.
Analysts expect Nike to post a 4.8% annual decline in revenue, its first annual decline since 2010 (excluding the pandemic-affected 2020) and a massive 21.8% drop in profit. In recent years, Nike has dealt with broader issues such as a more difficult battle for market share In an increasingly crowded and declining sportswear industry China But observers believe Nike’s headache is due to its wobbly brand reputation.
Many have linked this to Donahue’s leadership – Bloomberg Published Featured story last week titled “The Man Who Made Nike Unattractive” – with cash The changes center on Donahue’s strategy to cut ties with retail partners and shift away from innovation in the company’s athletic footwear and apparel.
“The blame seems to fall squarely on CEO John Donahoe’s lack of product/sports experience, which hindered his ability to make product decisions,” Bernstein analyst Anisha Sherman said Thursday of Donahoe’s ill-fated tenure. “But in our view, the problem wasn’t that Donahoe wasn’t capable of making product decisions himself, it was that the corporate focus shifted away from product.”
Crucial quote
“The transition will take time, but the market will be more forgiving with a new leader,” Sherman wrote. Wall Street’s impatience was reflected in the company’s latest financial results, with the stock down 0.1%. drunk Nike Inc.’s earnings fell 20% in June, to their lowest level in four years, as the company revealed it expects a 10% annual decline in sales for the quarter ending in August.
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