On September 23rd, a reporter from Beike Finance of the New Beijing News learned that on the eve of the release of the first quarter results for the 2025 fiscal year, Nike suddenly changed its leadership and appointed retired "veteran" Elliott Hill to replace John Donahoe as the group's global president and CEO.
After the disclosure of the change of leadership information, Nike's stock price rose significantly. As of the latest closing price of the trading day, Nike's stock price has risen by about 7%.
Lowering revenue guidance for fiscal year 2025, DTC strategy criticized for 'excessive tilt'
Nike did not directly answer the reason for the change, but Executive Chairman Mark Parker said, "Given our future needs and past business performance, after careful consideration, the board believes that Elliott Hill has global expertise, leadership style, a deep understanding of our industry and partners, coupled with his passion for sports, our brand, products, consumers, athletes, and employees, making him the right person to lead Nike's next phase of growth
The growth of future performance is the most concerning issue for Nike's board of directors and investors. In the 2024 fiscal year performance disclosed in June this year, Nike's revenue only slightly increased by 0.39% year-on-year to $51.4 billion, which is the lowest revenue growth rate for Nike since 2010 (excluding 2020). Meanwhile, Nike has also lowered its revenue guidance for the full fiscal year 2025. As a result, Nike's stock price not only came under pressure, but its stock rating was also downgraded.
Although Nike is still the world's largest sports brand, its performance growth rate has fallen behind. Compared to Nike's revenue growth rate, Adidas' revenue increased by over 10% in the latest disclosed second quarter results, while ANTA Sports recorded a 13.8% increase in revenue in the first half of the year. In addition, Nike has been significantly surpassed by ANTA in the Chinese sports consumer market.
Regarding the reasons for the sluggish performance, some analysts believe that Nike's "DTC (Direct to Consumer) strategy" proposed in 2020 has caused the company to distance itself from its wholesale partners, resulting in a significant decline in Nike's wholesale business revenue and opening the door for competitors to seize Nike's market share. Meanwhile, the reduction in communication with wholesale partners has also had an impact on the company's product innovation advantage.
The "DTC strategy" mentioned above is one of the reform plans proposed by Tang Ruoxiu after he became the global CEO of Nike in January 2020. Tang Ruoxiu previously worked at consulting firms such as Bain&Company and eBay. After serving as CEO of Nike, he invested billions of dollars to promote the "DTC strategy" in leading Nike's digital transformation, which significantly improved Nike's online revenue. In the past four years, Nike's online business has doubled in growth, accounting for 30% of total sales. However, due to the interruption of cooperation with retailers, Nike's online marketing costs have also been continuously rising.
Regarding the problems caused by the excessive tilt towards DTC strategy, Tang Ruoxiu stated in an interview that the company's excessive focus on retail business in the process of digital transformation has led to a growing distance from traditional wholesale partners. Nike is actively revising this strategy and attempting to improve its relationships with wholesale partners.
Nike's change of coach may benefit Taobao International
Now it seems that Nike has adopted a strategy of replacing the CEO to further solve the dilemma. In terms of CEO succession, Nike has adopted the same strategy as its old rival Adidas' 2023 "change of leadership" - using "veterans".
Elliott Hill worked at Nike for 32 years before retiring in 2020, holding senior leadership positions in Europe and North America, helping the company grow its business to over $39 billion; Before retirement, his last position at Nike was President of Consumer and Marketing, leading all commercial and marketing operations for Nike and the Jordan brand.
Returning to Nike this time, Elliott Hill has set his sights on addressing innovation gaps. "I look forward to working with the team to provide bold, innovative products that will make us stand out in the market and attract consumers in the coming years," he said
Citigroup released a report stating that after Nike changes its CEO, it may accelerate the reset of inventory in Chinese channels in the fourth quarter, which may be beneficial for Chinese retailer Taobao International but not beneficial for ANTA and Li Ning. In addition, Citigroup has cancelled its negative catalyst observation on Taobao International, due to reasons such as Nike changing CEO and resetting channel inventory, which is expected to reverse its situation in the Chinese market next year.