Pressure is mounting on Nike’s new CEO, Mr. Hill, as analysts doubt his initial statements will meet market expectations ahead of quarterly earnings. With declining market share and sales, particularly among younger consumers, revitalizing the brand is seen as a long-term challenge. Despite a focus on core running franchises and attempts to rebuild retailer partnerships, recent sales figures show significant declines, prompting concerns about Nike’s strategic direction and overall performance in a competitive landscape.
Pressure Mounts on Nike’s New CEO, Mr. Hill
Analysts are skeptical that Mr. Hill’s initial statements will suffice when Nike unveils its quarterly earnings. To meet market expectations, he needs to deliver a comprehensive strategy focused on enhancing innovation, rebuilding partnerships with retailers, and stabilizing sales amid increasing competition from nimble brands like Hoka and On. Jay Woods, chief global strategist at Freedom Capital Markets, noted, “He is really under the microscope because he has given himself a lot of time to set up a structure and a game plan,” referencing Nike’s decision to delay its investor day in November while Hill acclimates to his new position. Nike has yet to respond to inquiries for further comments.
Experts believe that revitalizing the brand will take several quarters. The recent transition from John Donahoe, a data-driven CEO, to Hill, a long-time Nike employee who began as an intern in 1988, signals the board’s intention for a complete overhaul. According to David Swartz, an analyst at Morningstar, “I don’t think there will be a short leash.” However, challenges loom large for a company that has witnessed a 2% decline in U.S. market share and a staggering 6.2% drop in Europe since the start of 2024, as reported by Consumer Edge, which monitors credit and debit transaction trends. Projections for second-quarter revenue indicate a 9.4% decrease, bringing it to $12.13 billion, as per data from LSEG. Earnings per share are anticipated to fall to 63 cents, down from $1.03 a year prior.
Challenges in Consumer Demand and Sales
Consumer interest in Nike products has waned compared to last year, according to insights from HundredX, a company that assesses public sentiment towards brands. This decline is most evident among younger consumers, a crucial target demographic. Early buyers have not provided the expected boost; Foot Locker, which sourced 65% of its sports products from Nike last year, recently lowered its annual sales forecast due to weak demand for Nike footwear during the quarter ending November 2. Overall, Nike sales at major retailers, including Foot Locker, Walmart, Target, and Dick’s Sporting Goods, dropped by 7% compared to the previous year for the quarter ending November 30, as per data from Yipit.
In the lead-up to Cyber Monday, online sales saw a meager 1% year-over-year growth, failing to keep pace with inflation, according to Facteus, which tracks credit card transactions. Conversely, sales at Nike’s physical stores experienced a 7% decline during the same timeframe. Nike’s struggles can be traced back to its 2020 decision to pivot away from third-party retailers. In early February, shortly after announcing extensive cost-cutting measures, the company revealed plans to lay off 2% of its 80,000 workforce. Since then, efforts have been made to mend relationships with retail partners.
Many analysts believe that Nike’s resurgence will hinge on rejuvenating its core business in running. During a recent running conference in Austin, Texas, Nike revealed plans to intensify its focus on three key running franchises: Pegasus, Structure, and Vomero. The company intends to launch various iterations of each shoe next year at differing price points, a strategy that Cristina Fernandez, an analyst at Telsey Advisory Group, suspects was influenced by Mr. Hill.