Companies and Brands

New Management Won't Fix Nike

Douglas A. McIntyre

Published: September 21, 2024 9:09 am

It used to be that Nike (NYSE: NKE) dominated the athletic wear business on its own, sometimes competing with Adidas. It has a huge line of athletic shoes led by Air Jordan. However, Puma has become a popular brand around the world. So have Hoka and On. Hoka parent Deckers (NYSE: DECK) recently released strong earnings. Management said Hoka product sales were the primary driver. Nike has a problem management can’t fix. It has too much good competition.

Nike’s board recently fired CEO John Donahoe and replaced him with Elliott Hill, who had previously worked at Nike. Shares rallied 6% but are still down 20%, while the S&P 500 is up 18%. However, based on Nike’s stock price, its problems are not new. They are at least half a decade old. Over the last five years, Nike’s stock has been flat, while the S&P is up 91%.

Nike recently admitted that it had challenges. Donahoe said Nike was working on “new term challenges.” That was part of the most recent quarterly analysis. Revenue was flat for the period at just over $12.5 billion. Annual revenue was flat for the year after tremendous growth from 2018 to 2022.

Two recent events show how long it will take Nike to recover. First, its presence at the Paris Olympics did not help sales. Second, it has not done what it said it would to turnaround its problems. There has been no huge launch of “innovative” products.

Reuters recently reported that Nike’s primary concern was the relevance of its products. The success of brands like Hoka shows that the competition wins the “relevance” battle. That cannot be fixed overnight or even in a few quarters.