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Latest Business News: Nike Inc.’s newly named Chief Executive Officer Elliott Hill soon will get a full picture of the problems he’s inherited. The world’s largest sportswear company reports earnings on Tuesday afternoon, with sales expected to fall about 10%. Nike shares advanced less than 1% on Tuesday ahead of its earnings report. The stock had been down about 19% through Monday’s close.
Much of the numbers will not mean much to most investors, who believe the current quarter is something of a throwaway as they wait for the new CEO’s strategy.
“Everyone knows that Nike stock now will be based on what Elliott does in the future and that isn’t something that can really be addressed,” said Simeon Siegel, analyst with BMO Capital Markets. “This is a picture of a reality we already know has been changed.”
Hill, a Nike veteran who worked his way up from an internship four decades ago, is stepping out of retirement to replace John Donahoe as chief executive on 14 October. Mr Donahoe became chief executive in 2020 when sales were soaring but has presided over one of the most turbulent years in Nike’s five-decade history.
The board of the company chose Donahoe, former eBay Inc. and Bain & Co. chief, to take the top job with the hope that he might use his e-commerce prowess to change the firm into a digital behemoth. He turned off or curtailed sneaker distribution to more than half the company’s retail partners and directed more supply to Nike’s company-owned stores, websites, and apps.
Under Donahoe, Nike topped $50 billion in revenue. Its growth had come at the hands of fast-pacing sales of lifestyle sneakers such as Dunks and Air Force 1s. But when sales of those items began to cool last year, executives were scrambling for whatever they could sell in a world where growing competition from brands such as On, Hoka and Salomon filled shelf space in stores where Nike once had room to breathe.
In December, Donahoe outlined a plan to slash $2 billion in costs, including a 2% reduction of Nike’s workforce, which it phased through the first half of the year. Then, in June, Nike had its worst day on the stock market since it went public in 1980. Executives said at the time that sales would decline during the company’s fiscal year. That intensified investors’ clamor on Donahoe and his executive team.
Slowing Development: Meanwhile, product development at Nike’s headquarters in Beaverton, Oregon, has slowed because the company had to rely on its existing lifestyle shoes during pandemic crises. Executives said they’re resetting the product pipeline with a three-year blitz started ahead of the Olympic Games in Paris this year.
Investors would be keen to hear about Hill’s plans on how he intends to mend fences with the spurned retailers, retain staff who’d lost faith in the earlier regime, and accelerate innovation to bring in new products to market on his assuming the role of CEO.
Nike investor day is slated for November, but analysts expect the management to push it back to give Hill more time to “formulate a more detailed turnaround plan.”.
“Expectations are very low. We know that business in North America is soft and China is not so good,” said David Swartz senior equity analyst for Morningstar. He predicted that the company’s fiscal first quarter “is going to be sort of the bottom in terms of sales declines, and it’s going to get a little bit better as we go through the fiscal year.”
