Nike (NKE.N) Chief Executive Officer John Donahoe will step down on Oct. 13 and be replaced by former Nike executive Elliott Hill. Nike shares rose sharply after the company announced the CEO's departure.
The athletic shoe and apparel maker has been hurt in recent years by a slowdown in China and challenges from emerging rivals such as Deckers Outdoor Inc's Hoka brand and On Holding. Nike shares have fallen 24 percent this year.
John Donahoe will resign on October 13 and will serve as an advisor to the company until January 31.
He will be replaced by former Nike executive Elliott Hill, who will begin his new role on October 14.
Nike shares rose 10% to $89.43 in after-hours trading Thursday.
One analyst said Nike's latest earnings report was a "punch" for the stock market when it was released in late June. Not only did Nike miss fourth-quarter sales expectations, it also lowered its full-year revenue guidance, leading to a series of stock downgrades.
It’s worth noting that the entire sportswear industry as a whole has slowed from its breakneck growth during the pandemic. But the recent success of On and Hoka suggests that some of Nike’s problems are self-inflicted.
Under Donahoe, for example, Nike scaled back its wholesale distribution network, choosing to focus on direct-to-consumer efforts. In the process, the company severed ties with many of its longtime brick-and-mortar partners, such as Foot Locker, DSW, and Macy’s, opening the door for competitors to take market share from Nike.
"I have seen Nike's plans for the future and believe in them wholeheartedly," Phil Knight, Nike co-founder and former chairman, said in a statement in June. "I am optimistic about Nike's future and John Donahoe has my unwavering trust and full support."
But Thursday's announcement suggested the board's confidence in Donahoe, who has served as CEO since 2020, has dropped sharply, even as it urged a company veteran to return.
Hill retired in 2020. Prior to his retirement, he served as president of Nike Consumer and Marketing, responsible for all commercial and marketing operations of Nike and Jordan brands. Nike said that during his career at Nike, he had held leadership positions in Europe and North America.
“After considering our future needs, past performance, and after a thoughtful succession process, the Board concluded that Elliott’s global expertise, leadership style, and deep understanding of our industry and partners, combined with his passion for sports, brands, products, consumers, athletes and employees, make him the right person to lead Nike’s next phase of growth,” said Mark Parker, Nike’s executive chairman.
Nike will release its first-quarter earnings report ending in August on October 1.
"Hill is well-liked both internally and with retail partners and has the potential to be an immediate morale boost," said Simon Siegel, an analyst at BMO Capital Markets. "Obviously, success requires exciting products and timing, but we expect Hill to drive Nike back to a competitive advantage (focused on product/marketing) rather than the status quo of recent years."
Barclays analyst Adrian Ishi agrees.
“While it will take time to materialize in the bottom line, we believe the hiring of a 32-year Nike veteran will help reignite the company’s focus on product innovation,” she wrote in a note Thursday.
In the short term, that may not matter. The management change alone could be enough to change investors' perception of the company -- especially ahead of its upcoming Investor Day on November 19.
“It has breathed new life and hope into a semi-abandoned blue-chip company.”
The article is forwarded from: Jinshi Data