Performance sounds the alarm, Nike recalls veterans

Facing the weak performance report for fiscal year 2024, former Nike executive Massimo Giunco couldn't contain his anger and fiercely criticized the current management of Nike.

Massimo Giunco pointed out that Nike's incompetent management not only wasted resources but also ruined the company's reputation.

Nike's executives also realized that only through organizational reform can the company rejuvenate itself.

In the fiscal year 2024 (the year ending May 31, 2024) earnings report, Nike stated that it continuously evaluates the composition of its board of directors to ensure the company maintains the right mix of experience, traits, and skills.

This time, Nike has taken action at the top leadership position.

Veteran Returns

On September 19, Eastern Time, Nike announced personnel changes.

According to the announcement, effective October 14, 2024, Elliott Hill will replace John Donahoe as Nike's President and CEO, a member of the board of directors, and a member of the board's executive committee.

Elliott Hill is no ordinary figure; he is a seasoned veteran at Nike.

According to Nike's records, Elliott Hill is 60 years old, graduated from Texas Christian University with a Bachelor of Science in Kinesiology, and holds a Master's degree in Sports Management from Ohio University.

As early as 1998, Elliott Hill joined Nike and held several key positions in sales and retail, including serving as Vice President and General Manager of Nike U.S. Retail.

From 2018 to 2020, Elliott Hill became President of Nike's Consumer and Marketplace Division, leading all commercial and market operations for the Nike and Jordan brands.

Elliott Hill is highly capable. During his tenure, Nike underwent a series of reforms, including scaling back wholesale operations, shifting focus to direct sales, and increasing investment in digital channels. At the same time, Nike achieved results in marketing and brand building through marketing campaigns and collaborations.

Industry insiders noted that Elliott Hill enjoys a strong reputation both within Nike and among retail partners, and his return could help boost morale at Nike.

Williams Trading analyst Sam Poser believes that Elliott Hill's return as President and CEO is seen as a major boon for Nike, bringing his rich experience and familiarity with the company's culture back to the company, which will have a positive impact.

Facing Challenges

After Elliott Hill left Nike in 2020, the company faced a more complex environment, including the global COVID-19 pandemic, slowing global economic growth, and increased market competition, all of which challenged Nike's performance growth.

In fiscal year 2024, Nike's revenue was $51.362 billion, a slight increase of 1% on a currency-neutral basis, marking its worst revenue performance in recent years. Net income attributable to shareholders was $5.7 billion, up 12% year-over-year.

During the same period, Nike faced greater growth pressure in North America, with sales declining 1% year-over-year to $21.4 billion.

Massimo Giunco, who worked at Nike for over 20 years, pointed the finger at John Donahoe for the company's struggles.

He believes that the management under John Donahoe was blindly confident and, in an effort to enhance Nike's digital capabilities and optimize the organization, restructured Nike's long-standing product category divisions into performance-based segments.

After John Donahoe took office, he bet heavily on digitalization and reduced investments in brand advertising and sports events. However, during his tenure, Nike's revenue growth continued to slow, and net income nearly stagnated.

In fiscal year 2021, Nike's net income was $5.727 billion, and by fiscal year 2024, it remained at $5.7 billion.

Greater China is Nike's second most important revenue source after North America. Due to Nike's declining competitiveness in Greater China in recent years and the rise of local Chinese brands like Anta (02020.HK), Nike's revenue from Greater China also stagnated from fiscal year 2022 to fiscal year 2024.

Nike's management stated during the fiscal year 2024 earnings call that the company experienced significant shifts in consumer traffic in key markets, especially in Greater China, where in-store traffic declined by double digits compared to the previous year.

Kevin McCarthy, Senior Research Analyst at Neuberger Berman, previously believed that the root of Nike's current problems lies in its management, and he speculated that John Donahoe might end his CEO tenure early. Nike's recent personnel announcement confirmed Kevin McCarthy's speculation.

Due to poor performance in multiple markets, especially in the last three quarters of fiscal year 2024, which fell short of expectations, Nike's management lowered its guidance for fiscal year 2025. Nike expects revenue in the first quarter of fiscal year 2025 to decline by approximately 10%, significantly worse than the market's expectation of a 3.2% decline. Additionally, Nike anticipates fiscal year 2025 revenue to decline by mid-single digits, compared to the market's expectation of 0.91% growth.

This year, Nike's stock price has been abandoned by investors, especially after the fiscal year 2024 earnings release, when Nike's stock price plummeted nearly 20%, reflecting investors' lack of confidence in the company's growth prospects.

With the return of veteran Elliott Hill, Nike hopes to regain its momentum. Nike's Executive Chairman Mark G. Parker said, "We are delighted to welcome Elliott Hill back to Nike. After careful consideration and discussions about our future needs and past performance, the board made this decision."

Elliott Hill's return has sparked optimism among secondary market investors. During after-hours trading on September 19, Eastern Time, Nike's stock price rose significantly, up 7.27% to $86.87 per share at the time of writing.

Author: Yao Yuan