Turn the company around by bringing back as CEO a retired former director who lived through the best years of the multinational. This is what Nike is going to try, which has had a very disastrous year in terms of results. In doing so, it replaces the CEO behind these bad figures, who will nevertheless receive a million dollars in compensation for his work.
The latter is John Donahoe, who was confirmed a few weeks ago as Nike’s first sword, a position he has held since the pandemic. He came to the sportswear manufacturer from Ebay, with the aim of boosting the American multinational’s online sales. In mid-August, Nike founder and president Phil Knight assured that Donahoe had his “unwavering confidence” and “full support.”
That support was shattered a few weeks later. Starting in October, he will be replaced as CEO by Elliott Hill, a veteran former Nike employee who spent more than 30 years at the company before retiring and became one of the company’s top sales and consumer leaders. That is, he’s bringing in someone from home, with charisma and a desire to turn the company around.
Less support from customers and investors
Nike is going through tough times. Its 2025 fiscal year has just begun, because it has a different fiscal calendar than the calendar year. In the first quarter, which ends September 30, it expects revenue to decline 10%, even though the Olympics, the European Cup and soccer’s Copa America are typically peak billing periods. And for the full year—which ends June 30—it assumes sales will decline by 5%.
This negative outlook has translated into investor rejection. Since John Donahue joined the company in the midst of a pandemic, Nike’s stock market value has fallen by more than 20%. And if we only analyze the evolution so far this year, the decline has reached 25%. On the other hand, other sportswear manufacturers have benefited from the support of consumers and the market. This happened with the owner of Hoka or with On Holdings, which so far this year have seen stock market increases of more than 30% and 80% respectively.
On the other hand, since the announcement of the replacement of Nike’s CEO at the end of last week, the title has taken off and is up more than 7%.
A message of “perseverance and commitment”
Elliott Hill won’t take over as Nike CEO until mid-October. For now, he’s sent a message to staff through a corporate video. In front of a portrait of the late basketball player Kobe Bryant, who was Nike’s face for years, he draws on his own experience to urge on the possibilities for growth within the company.
“I started as an intern in a sales office in Memphis, Tennessee; and retired 32 years later as president of the consumer division,” he says. “The company was growing and providing opportunities for its employees. I spent five years in Europe, which was a great experience professionally and personally. “I’m very happy to be back.”
In the same message, he uses sports-related topics to ask for more effort. He urges employees to “work together, as a team and to put the consumer at the center of all decisions made.” “We have to win now and get results.” Also, if I had to choose a sporting event, it would be in a relay chain, precisely because of this teamwork, which also requires “perseverance and commitment” to succeed.
Layoffs and million dollar compensation
What Hill doesn’t comment on in the video is the cost-cutting plan that Nike announced in the spring. It involves cutting $2 billion in costs (about €1.8 billion at the current exchange rate). According to the company, this measure will affect 2% of its global workforce, which is equivalent to about 1,500 people. In Spain, Nike does not have any factories, but it does have about thirty points of sale. Half of the stores are in Madrid and Barcelona and the majority are in shopping centers.
While we wait to see how this project will come to fruition, the outgoing CEO will leave the company after earning $104 million in recent years, the equivalent of €94 million. Of these, the majority – almost $84 million – corresponds to his salary, but it also includes a bonus in shares, which he will receive even if poor results lead him to leave the company, according to information published by the agency. Bloomberg
It also remains to be seen whether the new CEO will continue his business strategy of pushing online sales and lowering prices to sell products under $100 and attract new buyers. Nike is not currently planning an investor meeting until November, when it could provide details on its new strategy.
“We don’t expect Nike to completely abandon its commitment to e-commerce,” Oppenheimer analyst Brian Nagel told Reuters. “What we see is that Elliott Hill’s appointment is an indication that Nike is going to refocus on product innovation,” he said.
