Nike’s new CEO is expected to step up the company’s efforts to repair relationships with retailers and boost sales, reversing a strategy by outgoing chief John Donahoe that focused on selling directly through its stores and website.
The sportswear giant on Thursday named company veteran Elliott Hill as its chief executive, instilling confidence in investors about a turnaround at the company that has been struggling with strategy missteps and intense competition.
Shares in the company, which have lost a quarter of their value this year, rose 8% in early trading on Friday.
“Nike’s board (including the controlling Knight family) wanted a leader with extensive knowledge of the company to address its recent problems, the most pressing of which is Donahoe’s effort to prioritize direct selling over product development and retail relationships,” said Morningstar analyst David Swartz.
Former eBay executive Donahoe took the helm of Nike in 2020 with a goal of building out its e-commerce business and boosting its direct-to-consumer (DTC) division.
That meant trying to sell more products through Nike’s own stores, apps and websites at full price and relying less on other retailers like Foot Locker and Macy’s.
The strategy shift backfired, allowing newer brands like Roger Federer-backed On Holding and Deckers-owned Hoka (DECK.N) to steal some shelf space and market share from Nike.
Earlier this year, Nike executives admitted that its DTC strategy was not driving growth as expected and that it was losing ground, especially in the running category.
“Donahoe was the right man for the job when he came in to change the business model,” said Art Hogan, chief market strategist at B. Riley Wealth.
“(But) the world changed after the pandemic and consumers wanted to go out and see the brand on the shelves. Unfortunately, in 2020 they changed too abruptly for the transition to be easy.”
Nike is pinning its hopes on an Olympic year to regain market share by highlighting high-performance products such as the Alphafly 3 racing shoe and Pegasus running shoe.
It is also planning to launch new sneakers for $100 or less, to appeal to price-conscious shoppers.
A clearer picture of Hill’s strategy will emerge at the company’s investor day in November.
“While we don’t expect Nike to completely abandon its direct-to-consumer focus, we view the appointment of Elliott Hill as CEO as a clear indication that Nike is refocusing on product innovation,” said Brian Nagel, an analyst at Oppenheimer.
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