Nike is undergoing a major leadership shakeup as it faces increased competition and challenges with its strategy.
The athletic company announced on Thursday that CEO John Donahoe will retire next month and will be succeeded by Elliott Hill, a longtime Nike executive.
Following this news, Nike’s stock rose by 9% in after-hours trading, although it has fallen 24% this year.
Nike is grappling with a slowdown in consumer spending, as shoppers are opting for basic items and experiences, such as travel and concerts, over expensive sneakers and athletic wear.
Competing brands like Hoka and On are also making their mark, intensifying the competition.
Many investors and analysts had been calling for changes at Nike, and the news of Donahoe’s retirement was welcomed by those looking for new direction.
Nike reported flat sales last quarter and predicted a further 10% drop in sales for the upcoming quarter, particularly as its classic brands lose momentum.
Analysts have pointed out that Nike has struggled to introduce innovative new products, especially in the running category, allowing newer brands to gain traction.
Brian Nagel, an analyst at Oppenheimer, noted that Hill’s appointment indicates a stronger commitment from Nike’s board to implement significant changes.
In recent years, Nike has also tried to revamp its distribution strategy, reducing the number of traditional retailers selling its products and shifting focus to its own online channels.
The company claims it can earn more than double the profit by selling directly through its website and physical stores compared to wholesale partners.
Nike narrowed its focus to just 40 select retail partners, including Dick’s Sporting Goods and Foot Locker.
However, this abrupt change negatively impacted sales, leading Nike to reestablish relationships with some previously cut retailers.
Neil Saunders, an analyst at GlobalData Retail, commented that Nike underestimated the importance of third-party retailers and went too far with its strategy.
Other major sportswear brands are also facing similar pressures. Lululemon’s stock has dropped 46% this year, while Under Armour’s shares have lost 8%.
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