Nike is Making a Major Shakeup

Nike is undergoing a major leadership overhaul as it grapples with intensifying competition and internal strategy missteps. On Thursday, the athletic apparel giant announced that CEO John Donahoe will retire next month and will be succeeded by Elliott Hill, a long-time former Nike executive.

Following the announcement, Nike’s stock jumped 9% in after-hours trading, despite a year-to-date drop of 24%. The company has been facing significant challenges, including a consumer slowdown and fierce competition from emerging running brands like Hoka and On. Changing consumer preferences have also played a role, with customers opting for essentials and experiences, such as travel and concerts, over high-priced sneakers and athletic gear.

The leadership change has been widely welcomed by investors and analysts, who have been calling for a shakeup at the company. Brian Nagel, an analyst at Oppenheimer, noted that Nike had become “more lax on product innovation, particularly in running,” allowing new brands to gain traction. Nagel added that Hill’s appointment signals a stronger commitment from Nike’s board to pursue a turnaround strategy.

In addition to competition, Nike has faced criticism for its distribution strategy. The company cut ties with numerous traditional retailers in an attempt to direct customers to its own online and physical stores, where it can earn higher profits. This strategy, which focused marketing and product resources on just 40 key partners like Dick’s Sporting Goods and Foot Locker, initially backfired, hurting sales. Nike has since reversed course, bringing back some of the retailers it previously cut.

“Nike underestimated the importance of third-party retailers,” said Neil Saunders, an analyst at GlobalData Retail, earlier this year. The abrupt shift in strategy, Saunders noted, strained Nike’s relationships with wholesalers and negatively impacted sales.

Nike is not alone in facing market pressures. Rival sportswear companies Lululemon and Under Armour are experiencing similar struggles. Lululemon’s stock has plummeted 46% this year, while Under Armour shares have declined by 8%.

With the appointment of Hill as CEO, Nike aims to refocus on product innovation and better navigate the challenging retail landscape, as it seeks to regain its footing in a rapidly evolving market.