Shares of Nike (NYSE: NKE) jumped in after-hours buying and selling on Thursday after information broke that CEO John Donahoe is leaving the corporate and can be changed by Elliott Hill, a Nike veteran who had held a variety of senior positions earlier than retiring in 2020.
Upon Hill’s return, he’ll develop into president and chief govt of Nike, the corporate mentioned, in addition to a director of the board.
Nike shares have been up greater than 8% after hours as of late Thursday afternoon. The inventory has usually underperformed this 12 months and is down round 24% 12 months up to now.
Based on a press launch, Donahoe and the board “have determined” that Donahoe will retire from each his chief govt function and from the corporate’s board, though he’ll keep on in an advisory function throughout the transition by means of January 2025. The management change can be efficient on October 14.
A rocky tenure
The information follows a difficult 12 months for the sportswear big, and comes after a rocky tenure for Donahoe, who succeeded longtime CEO Mark Parker in January 2020.
Parker is now govt chairman of Nike. In an announcement, he enthusiastically welcomed Hill again. “Given our wants for the longer term, the previous efficiency of the enterprise, and after conducting a considerate succession course of, the Board concluded it was clear Elliott’s world experience, management fashion, and deep understanding of our trade and companions, paired along with his ardour for sport, our manufacturers, merchandise, customers, athletes, and staff, make him the correct individual to steer Nike’s subsequent stage of progress,” Parker mentioned.
As Quick Firm’s Mark Wilson wrote in an in-depth profile of the corporate earlier this 12 months, “Whereas Parker was a shoe designer by coaching and recognized for working instantly with the design groups, Donahoe served as CEO of eBay and administration consulting agency Bain & Co., the place he spent 23 years. In his 4 years at Nike, he’s confirmed to be extra of a calculator than a creator.”
When Donahoe started at Nike, he nearly instantly discovered himself battling the fallout of the COVID-19 pandemic. He executed layoffs, restructured the corporate’s design and improvement groups, and spearheaded Nike’s direct-to-consumer technique, transferring away from wholesale retailers.
“The transfer diminished Nike’s ‘futures orders’ program, which permits retailers to preorder merchandise months prematurely, giving the corporate a money infusion even earlier than merchandise go on sale,” Wilson defined in his story. “The lack of these small-store relationships had an unlucky aspect impact: Nike severed an important suggestions loop from the companies closest to its prospects.”
Within the void, running-shoe upstarts like Hoka and On started taking off with prospects and specialty retailers. Brooks, in the meantime, overtook Nike because the market chief for grownup efficiency trainers within the U.S. in 2022—and held that place by means of 2023, in accordance with information from Circana.
Nike additionally confronted criticism that it was dropping its innovation edge beneath Donahoe, who was decidedly extra faraway from the corporate’s design groups than Parker. Beneath Donahoe, the corporate leaned closely on rereleases of older footwear—Air Power 1s, Dunks, and Jordans—to goose income.
Donahoe’s technique of doubling down on retro rereleases and pursuing DTC gross sales was efficient within the brief time period: Nike’s annual income grew from $37 billion in 2020 to $51 billion in 2023. However income for FY 2024, which ended on Could 31, was up by just one%.
In June, Nike mentioned that it expects gross sales for Q1 2025 will drop 10%. It stories outcomes on October 1.
“Innovation was difficult for your entire trade throughout COVID,” Donahoe instructed Wilson. “We don’t apologize for exploiting sneaker tradition and the success of three of the biggest franchises.”
The Paris Olympics have been a giant take a look at for the corporate—the beginning of what Donahoe promised can be a yearslong “tremendous cycle” of product releases round Nike Air that might reset the bar for innovation. The corporate’s mantra across the Video games was “Successful is every thing.”
This story is growing.