6 Biggest Challenges Facing Incoming Nike CEO Elliott Hill
Nike, the largest sportswear brand in the world, has pulled its full-year forecast for 2024 after reporting a steeper than expected drop in sales for its third quarter.
Revenues at Nike for the three months to the end of August fell 10% to US$11.6bn compared to the same quarter a year ago, while net income dropped by 28% to US$1.1bn.
Nike said it has pulled its forecast for the year to give incoming CEO Elliott Hill time to reset the troubled sportswear maker’s strategy.
On an earnings call, Nike chief financial officer Matthew Friend suggested that ditching the company’s financial guidance would provide Hill with the “flexibility” to examine current strategies and trends “and develop our plans to best position the business” for the future.
Nike is pinning its turnaround plans on increasing sportswear sales to “everyday runners” after posting the biggest drop in quarterly sales since the pandemic.
Recently, the company has pursued a strategy of selling more retro styles and taking its shoes out of third-party stores.
“Nike’s a running company, Nike’s a running brand and it’s incredibly important for Nike to win with runners,” Friend told analysts. “And so our commitment to reinvesting in those channels with those partners on the ground every day is how we’re going to change the trajectory of this business.”
The sportswear giant announced last month that company veteran Elliott would come out of retirement to replace John Donohoe as CEO on 14 October.
A Swoosh veteran
Hill, a Nike veteran who previously served as president of consumer marketplace before retiring in 2020, joined the sportswear giant as an intern. He has spent his entire career at “the swoosh”, bar a brief stint as an assistant trainer for the Dallas Cowboys football team.
Donohoe, by comparison, is an outsider as an Ivy League-educated former tech executive and Bain consultant.
Nike employees celebrated the news of Hill’s appointment. “Elliott is truly a revered leader at the company,” one told the Financial Times.
However, as to what Elliott Hill can actually do to improve the company’s fortunes may not be felt for months?
So, what are the biggest challenges facing Elliott Hill as he takes over the reins at Nike?
6 biggest challenges facing Nike CEO Elliott Hill
#1 - Losing market share
Nike’s sales growth and market share have been under pressure from newer, on-trend rivals such as On and Hoka, as well as the resurgence of New Balance.
#2 - Digital sales plummet
Nike’s digital sales crashed by 20% globally in the first quarter.
#3 - US port strike
A port strike has affected 14 major ports from Maine to Texas that is costing the American economy US$5bn each day due to supply chain disruptions. The strike will send the US economy into a downward spiral if it lasts longer than four weeks.
Longshoremen are seeking a 10% pay rise each year over a six-year period.
#4 - Damaged retailer relationships
Outgoing CEO John Donohoe pursued a strategy of halting or reducing the flow of trainers to more than half of Nike’s retail partners, in favour of direct sales either online or in Nike stores.
As a result, its relationships with US retailers such as Foot Locker and Dick’s Sporting Goods have been damaged. These stores quickly filled their shelves with on-trend competitors like On, Hoka and New Balance.
David Daniels, an assistant professor of management and organisation at the National University of Singapore, told Business Insider that Hill’s experience could be useful in rebuilding strained relationships with retailers.
#5 - Huge layoffs planned
At the same time as trying to increase market share and grow revenue, Nike previously said it plans to slash US$2bn in costs over the next three years, including making around 1,500 workers redundant.
#6 - Stuttering Chinese market
Footwear sales in China dropped 3% to US$1.2bn in the first quarter of 2024.
The sportswear giant has been hurt by depressed consumer spending in China after a frail post-pandemic recovery driven by high youth unemployment and dropping real estate values. Chinese consumers have also begun preferring locally made products.
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