On Wednesday, Nike’s shares fell by 6% following the publication of its financial results for the last quarter. Over the past three years, the company’s shares have lost 45% of their value. The market is noticing that Nike is losing its appeal among consumers, losing out both to Chinese competitors like Shein, as well as new premium brands such as Lululemon. The problem is to be solved by Elliott Hill, who is returning to the position of CEO, but there are tough quarters ahead for the company.
Nike is currently going through a difficult period. Once a brilliant symbol of continuous innovation, the brand now appears burnt out and devoid of fresh ideas. In response to these challenges, the company is shifting its leadership in search of a more effective growth strategy. Nike is losing market competition not only with new premium brands like Lululemon and Athleta (owned by Gap), but also with long-time rivals like Adidas. Additionally, Chinese shoe manufacturers and online stores such as Shein are also taking market share from the company. Although Nike is still a global leader in the sportswear category, its advantage over competition is decreasing. The entire apparel market grew by 5%, driven by strong results from Zara, Shein, and Uniqlo, while the value of the Nike brand fell by 4% over the year, according to a report by Kantar on global brands.
The company’s problems are confirmed by its financial results for the period from June to September. The drop in revenues was expected, but the poor sales of running shoes in the US (-14%) and Europe (-12%) came as a big surprise. This shows that the company’s investment in the Paris Olympics did not yield the expected results. Paradoxically, in China, where many Western brands are struggling with problems, Nike’s revenues fell by only 2%.
In the face of increasing market challenges, the company is looking for a new strategy. The return to the days when Nike was the undisputed leader in the industry is to be ensured by the employment of Elliott Hill, who returns to the position of CEO after retiring in 2020. Hill began his career at Nike as an intern in 1988 and has been associated with the company for his entire working life. His return is expected to help reverse the unfavorable situation, but the market has significantly changed over the last four years.
Outgoing CEO, John Donahoe, is leaving after four turbulent years in office. His main success was the strategy of promoting direct sales during the pandemic, when sportswear was being massively bought online. However, in 2023 consumers began to return to stores, such as Foot Locker, where Nike is no longer making as good results. Many believe that the company’s biggest problem is the loss of the so-called “cool factor” – the feeling that Nike products are the most fashionable choice on the market.
Elliott Hill has the task of reversing this trend, but it will be a major challenge. The new-old CEO needs time to develop a strategy, hence the company has postponed the “Investor’s Day”, originally planned for November 19, and withdrew earlier revenue forecasts. After the publication of the quarterly results, the company’s shares fell by 6%, and over the last three years the company lost 45% of its value. The market will be anxiously watching the decisions of the new management.
Paweł Majtkowski, eToro market analyst.
Source: https://ceo.com.pl/akcje-nike-spadaja-o-6-firma-traci-45-wartosci-w-ciagu-3-lat-powrot-elliotta-hilla-ma-odwrocic-negatywny-trend-93311
