Nike's shares are rallying after it named a new CEO. One analyst says it still has work to do

By Bill Peters

Elliott Hill will replace John Donahoe as chief executive next month, following months of struggles for the athletic-wear giant

After a months of weaker demand, a slumping share price and questions about its leadership, sneaker maker Nike Inc. is shaking things up at the top - announcing on Thursday that it would replace Chief Executive John Donahoe with company veteran Elliott Hill next month.

Nike's (NKE) stock jumped more than 10% at their peak after hours in the wake of the news.

The company said Hill - who started at Nike in 1988, rose to top leadership jobs in Europe and North America and retired in 2020 - would become its new president and chief executive on Oct. 14. He will also become a director on Nike's board and a member of its executive committee.

Donahoe, who joined Nike in 2014 as a board member and has served as chief executive since January 2020, will retire from that role and his role as president, as well as from Nike's board, on Oct. 13. He will serve in an advisory role through Jan. 31 to help with the leadership transition.

Donahoe, in a statement, said that "now was the time to make a leadership change, and Elliott is the right person" to succeed him.

Mark Parker, Nike's executive chair, cited the "the past performance of the business" as a reason for the change, and pointed to Hill's global expertise and "deep understanding of our industry and partners" among his qualifications for the job.

In a research note after the announcement Thursday, Jefferies analyst Randal Konik wrote that Hill's appointment as CEO "has been well-received by the market, reflecting confidence in his leadership."

"However, Hill faces challenges after his four-year absence, including rising competition and changes in distribution, brand building, and product," he added.

Konik said more details could be forthcoming during Nike's upcoming analyst day. The company reports its next round of quarterly results on Oct. 1.

The leadership change comes after fellow athletic-wear brand Under Armour Inc. (UA) earlier this year brought back founder Kevin Plank as its own CEO. Yet analysts remained skeptical about Under Armour's prospects, as higher prices for basics have taken a bite out of consumers' savings and their ability to spend on shoes, clothes and other sporting goods.

Meanwhile, consumers are burning through clothing trends more quickly amid the rise of fast fashion and influencer culture.

Nike has tried to attack those problems in a variety of ways. It has placed a greater emphasis on "newness" in the form of new sneakers and clothing, an expansion of its Jordan brand and a quicker product-development turnaround. It has tried to cut costs and sell fewer classic shoes.

The company for years had turned away from physical retail to focus on sales through its own stores and digital channels. But this year, it said it would focus more on brick-and-mortar stores after its direct-to-consumer business ran into operational hiccups and weaker sales.

Still, Nike's quarterly results of late have been disappointing and investor skepticism has persisted.

Though Donahoe navigated Nike through the pandemic - a time that saw its shares peak in 2021 - the company's stock has fallen more than 20% over the course of his time as CEO. Prior to their after-hours rally Thursday, shares of Nike had fallen 11.6% over the past 12 months.

In turn, some analysts began to question the ability of Nike's leadership to steer the company through the tougher economic backdrop.

"Management credibility is severely challenged and potential for C-level regime change adds further uncertainty," Stifel analyst Jim Duffy said in a note in June.

-Bill Peters

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09-19-24 1846ET

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