The markets have welcomed Nike’s announcement of the return to the top position of Elliott Hill, a veteran.
The company board of directors announced Hill’s new position as CEO on Thursday.
Hill replaces Nike’s CEO John Donahoe, who retired after growing concern over Nike’s performance.
Hill has returned home after 32 years with Nike. She will retire in 2020.
Analysts and markets are positive about Hill’s return
Nike shares soared by nearly 10% after the announcement.
Nike stock opened 7% higher on Friday and traded close to 8% higher in the pre-market. Adidas and Puma, two of Nike’s competitors, saw their stock prices fall 3.8% and respectively 5.7%.
This is definitely a positive. Nike, the dominant player in the sector, is regarded as a great opportunity to get back to the roots of the business, said Cristina Fernandez. Senior research analyst with Telsey Advisory Group.
Fernandez noted that Nike’s current leadership had lost focus on its product innovations and its relationships with its wholesale partners. Hill will be expected to rectify this upon his return.
Baird raised the Nike price target to $110, up from $100. The stock still has an Outperform ranking.
The brokerage expressed a more positive view on Nike’s earnings over a longer period of time and its stock performance in the coming 6-12 months.
Nike issues under Donahoe
Donahoe’s leadership of the company during the COVID-19 epidemic was initially praised.
Nike’s digital revolution was accelerated by his focus on direct-to consumer (DTC), but as time went on, Nike began to shift its attention away from the core strengths of product innovation and distribution.
Nike lost 20% of its value and 3% in earnings per share under Donahoe.
The company warned in June that it expected sales to drop by 10 percent during the current quarter, which was far more than analysts’ predictions of a 3.2% decline.
The announcement of Nike’s slowest sales growth for 14 years, (excluding pandemic) caused an historic drop in the stock price. It wiped out $28 billion from its market value.
Nike’s DTC aggressive strategy that saw it prioritizing its online retail channels over traditional brick and mortar wholesale and retail channels backfired.
The approach Nike took alienated many long-time Nike retail partners, and allowed rivals such as Adidas to take market share and small brands like On and Hoka.
Wall Street analysts questioned whether Donahoe was the best leader for Nike, given his background in tech and consulting.
Statista
Elliott Hill and Nike
Elliott Hill began working at Nike in 1988 as an intern and has since worked through 19 roles.
He held the most important position as Nike’s President, Consumer and Marketplace. In this role, he managed Nike’s biggest brands and oversaw commercial and marketing strategy across all global markets.
Hill’s tenure saw Nike Inc. grow its revenue from $39 billion to over $40 billion, and the company’s global reach expand.
Phil Knight, Nike’s co-founder, and the controlling shareholder, praised Hill for his experience in a press release.
Elliott’s in-depth knowledge of both the business and industry are exactly what is needed right now. Nike has a lot to do. I look forward to its return to speed.
Mark Parker, Group Chairman, said Elliott’s expertise in the global market, his leadership style and understanding of industry partners and consumers, along with his passion and love for sports, brands, products and athletes made him the ideal candidate to lead Nike into its next growth stage.
Challenges for Elliott Hill
Hill’s comeback comes at an important time for Nike.
Markets are hoping that Nike will focus on the things which have historically made it successful — innovative product designs, and an extensive presence in multiple retail channels.
He will have to focus on restoring Nike’s innovation in product development and re-establishing relationships with retailers who lost out during Nike’s shift towards DTC. Fernandez noted,
They need to introduce new products and get the product out there more. Also, they must bring back their marketing skills.
“By bringing in someone who has been with Nike 30 years, and understands the business inside out, they can return to their strengths.”
He has a deep understanding of the culture at the company and has many connections in the industry. This gives him an advantage when he takes on the new role.
Hill will face significant obstacles in trying to revive Nike’s fortunes.
Air Force 1 and Dunk are two iconic sneakers that have lost their edge.
Adidas has seen an increase in demand for the Samba line of shoes.
Hill will need to re-energize its product range with new styles and silhouettes that appeal to consumers in order for Nike, once dominant on the market, to regain their position.
Financial Times quoted JD Sports CEO Regis Schultz as saying: “This is not about technology, but fashion.
The key is to have new shapes. Thestreet.com I believe Nike is slow, they know it.
The post Elliott Hill Returns to Nike is a celebration for the markets, but how will he deal with his challenges? This post may change as new information becomes available
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