Sept 19 (Askume) – Nike Inc (NKE.N) said on Thursday that former senior executive Elliott Hill will rejoin the company and replace John Donahoe as chairman and CEO of the sportswear giant, a move that is expected to boost the company’s sales.
The company’s shares rose 8% after hours.
Hill spent 32 years at Nike, holding senior leadership roles in Europe and North America, where he helped grow the business to more than $39 billion, the company said.
Previously, he served as President of Nike Consumer Markets, leading all commercial and marketing functions for the Nike and Jordan brands and retired in 2020.
Hill’s compensation as chairman and CEO will include an annual base salary of $1.5 million, Nike said in a regulatory filing. Hill will take over as CEO on Oct. 14.
Analysts applauded the move. Jessica Ramirez of Jane Haley & Associates said the CEO change “sends a positive signal because he is someone who understands the brand and the company very well.”
Donahoe will be tasked with strengthening Nike’s online presence and increasing sales through direct-to-consumer channels.
The boost helped the company meet post-pandemic demand for sports and casual apparel, pushing Nike’s annual sales above $50 billion for the first time in fiscal 2023.
However, sales are under pressure and growth is slowing, according to London Stock Exchange Group estimates. Nike’s annual sales are expected to fall to $48.84 billion in fiscal 2025 as inflation-weary consumers cut discretionary spending and China has a slower-than-expected recovery.
A lack of innovative and attractive products also dampens demand for Nike. Rival brands such as Roger Federer-backed On and Deckers Hoka (DECK.N) are wooing buyers and retail partners with sleeker, more stylish products.
Expectations of a top-level change have risen after billionaire investor William Ackman disclosed his stake in Nike. His Pershing Square Capital Management has continued to buy and currently owns 16.3 million shares of Nike stock, a person familiar with the matter said. Ackerman could not immediately be reached for comment.
A person familiar with Ackman’s thinking said Hill would be his first choice to succeed Donahoe. Ackman disclosed his stake in Nike through public filings but has not approached the company.
Hill’s previous role as the steward of Nike’s valuable Jordan brand, a major profit driver for the company, could also help the sportswear giant gain some momentum. As other sneaker brands, including On Running , are experiencing explosive growth in 2023, the value of some Jordans is declining in the resale market.
Over the past few years, Nike has reduced its partnerships with retailers and planned to drive more sales through its own stores and website. But those sales didn’t materialize, forcing the company to seek $2 billion in cost savings.
As part of the plan, Nike has so far laid off workers, reduced the supply of classic shoes such as the Air Force 1 and tried to improve its supply chain to boost profits.
David Swartz, a senior analyst at Morningstar Research, said: “Nike clearly wants to bring back someone who has a lot of experience” and “a deep understanding of Nike and its issues. As opposed to John Donahoe, who had no experience in the field.”
Swartz said Hill should “work to improve some of Nike’s relationships with its retail partners that buy large volumes of Nike shoes.” He added, “Over the past few years, Nike has lost some customers and recalled some products, which has led to some animosity toward Nike among sneaker and footwear retailers.”
Thomas Hayes, president of Great Hill Capital, called Hill “an excellent choice.” He said Nike now needed to “innovate and improve relationships with wholesalers.”
Following the latest announcement, Nike’s stock market value increased by $11 billion in after-hours trading, reflecting how much investors value Hill.
In comparison, on August 13, coffee retailer Starbucks announced the appointment of Brian Niccol, CEO of Chipotle Mexican Grill, causing Starbucks’ valuation to rise by US$21 billion in a single day. That same day, Chipotle’s market value fell by nearly $6 billion.
(The time frame and amount in this article have been changed to read “Nike’s annual sales are expected to decline to $48.84 billion in fiscal year 2025,” while paragraph 9 has been changed to read “Nike’s annual sales are expected to decline to $488.7 billion in fiscal year 2025″) USD is expected to remain unchanged” written)
