Analysts are taking a critical view of Nike Inc.’s management team ahead of the company’s third quarter earnings report on Thursday.
Following a week of high profile chief executive departures at Under Armour, Brooks and Allbirds — all for different reasons — some analysts are speculating whether Nike could be slated for a change at the top, given the company’s recent product and marketplace headwinds.
Last quarter, Nike announced new measures to “streamline” its organization to save up to $2 billion in costs over the next three years by implementing layoffs, simplifying product and increasing automation. At the time, the Swoosh reported that North America revenues were down 3 percent in Q2, with wholesale sales in the region down 9 percent.
Along with recent challenges, analysts have also become increasingly skeptical of Nike’s progress within its “Consumer Direct Acceleration” (CDA) program it rolled out in June 2020, which involves zeroing in on DTC and digital channels and pulling out of some wholesale channels. In recent months, Nike has re-entered or reinvigorated its wholesale partnerships with retailers such as DSW, Macy’s and Foot Locker.
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“Nike leadership is in the hot seat,” wrote Stifel analyst Jim Duffy in a Sunday note, explaining how investors will want to see proof of Nike’s improvement in North America. He added that a CEO change at the company along with a guidance shift could be a potential factor for future stock movement. Since December’s cost-cutting announcement, Nike’s stock took a dive and hasn’t fully gained momentum since. Shares are currently down about 7 percent, year-to-date.
Nike’s current CEO John Donohoe, formerly president and CEO of ServiceNow Inc. and chairman of PayPal Holdings, joined Nike as CEO in January 2020 as the company ramped up its digital efforts. He replaced longtime leader Mark Parker, who had been president and CEO since 2006.
In a note to investors last week, Morgan Stanley analysts led by Alex Straton also noted the possibility for a leadership change at Nike, given stunted progress in its DTC plan. This, Straton said, could be a potential positive catalyst “that could reignite bullishness on the stock” over the next twelve months.
“It appears the market is speculating on, and would welcome a potential management change given the limited progress and evidence of DTC transformation in Nike’s financials over the last five years,” Straton wrote.
In a Sunday note downgrading Nike to sell, Williams Trading analyst Sam Poser attributed many of Nike’s current challenges to its leadership team. The main issues, he said, relate to a lack of innovative products and decline in brand equity — or the ability to keep demand slightly ahead of supply.
“Nike’s current C-suite leaders lack the levels of brand and Nike institutional knowledge that the leaders had in 2015,” wrote Poser. “Many seasoned Nike executives across many parts of the corporation were let go or have left the company on their own accord since 2020.”
Just last month, 17-year Nike veteran Robin Green joined Hoka as its new president after leaving the Swoosh last year. In January, Nike managing director of strategic business ventures Andrew Campion left the company after 17-year tenure as well. And as Nike lays off more employees this year, the Swoosh is very much in flux.
“We fear that the layoffs will [primarily impact people] with institutional knowledge within the company, and will do more harm than good,” Poser said.
