Sept 20 (Askume) – Nike’s new chief executive is expected to redouble efforts to improve relationships with retailers to boost sales, following a strategy based largely on direct sales through stores and websites under outgoing CEO John Donahoe.
The sportswear giant on Thursday named company veteran Elliot Hill as chief executive , boosting investor confidence for the company that has struggled with strategic missteps and fierce competition.
Shares of the company, which have fallen by a quarter this year, rose 6% in premarket trading on Friday.
Morningstar analyst David Swartz said: “Nike’s board of directors, which includes the controlling Knight family, wanted a leader with deep corporate knowledge to address the company’s recent issues, this was most urgent. It was Donahoe who had worked hard to prioritize direct selling over product development and retail relationships.
Donahoe, a former eBay executive, took the helm at Nike in 2020 with the goal of building its e-commerce business and boosting its direct-to-consumer (DTC) unit.
That means trying to sell more products at full price through Nike’s own stores, apps and website, and relying less on other retailers like Foot Locker and Macy’s.
The change in strategy failed, allowing new brands such as Roger Federer-backed On Holding and Deckers-owned Hoka (DECK.N) to take some shelf space and market share from Nike.
Earlier this year, Nike executives acknowledged that the DTC strategy wasn’t growing as expected and was losing traction, particularly in running.
“Donahoe is here to change the business model, and he’s the right man for the job,” said Art Hogan, chief market strategist at B. Riley Wealth.
“(But) the world has changed post-pandemic and consumers want to get out and see brands on the shelves, and unfortunately they changed so rapidly in 2020 that it’s hard to easily bounce back.”
Nike hopes to gain some market share in the Olympic year by focusing on launching high-performance products such as the Alphafly 3 racing shoes and the Pegasus running shoes.
It also plans to launch new sneakers priced at $100 and below to attract price-conscious buyers.
Hill’s strategy will be unveiled at the company’s investor day in November.
“While we do not expect Nike to completely abandon its emphasis on the direct-to-consumer business, we believe the appointment of Elliot Hill as CEO is a clear signal that Nike is refocusing on product innovation,” said analyst Brian Nagel.
