Nike's stock has been dogged by these issues. Can a new CEO change the game?

By James Rogers

New Nike CEO Elliot Hill is inheriting "a turnaround that has yet to show momentum," according to Stifel analyst Jim Duffy.

Shares of Nike Inc. climbed 6% Friday after the sneaker maker and sportswear giant announced a CEO switch. But analysts say that incoming chief executive and company veteran Elliott Hill has his work cut out.

Hill, who retired from Nike in 2020, held a number of senior leadership positions in Europe and North America during his 32-year career with the company. He will take the company's helm from retiring CEO John Donahoe, on Oct. 14. Donahoe became Nike's CEO in January 2020 and has served on the company's board since 2014. He will retire as CEO and from the company's board on Oct. 13.

In a note released Thursday, analyst firm Stifel said that it is encouraged to see a long-term Nike insider return to the CEO role, but saw hurdles in his path. "Mr. Hill inherits a turnaround that has yet to show momentum," wrote Stifel analyst Jim Duffy. "Since 2020, NIKE has underperformed the industry and results in the past two years have been particularly uninspiring (five downward revisions to consensus estimates in the past six quarters). Management credibility has been challenged by underwhelming results."

Related: Nike shares swoosh higher after CEO switch, and other early movers

Nike shares (NKE) are down 21% in 2024, compared with the S&P 500 index's SPX gain of 19.3%. In June, Nike's stock suffered its biggest drop ever, weighed down by the company's pessimistic outlook and multiple downgrades.

To revive demand, Nike is cutting production on lower-selling classic sneakers and making newer products a larger part of its business. "A comeback at this scale takes time," Nike CFO Matthew Friend said during a June conference call to discuss the company's fourth-quarter earnings.

"Recent underperformance is a direct result of losing focus on what has made NIKE great for so many years," wrote Stifel's Duffy. "Under Mr. Hill's leadership, we hope to see a revitalization of the NIKE culture (the good parts) and a renaissance in innovation and design." Stifel has a hold rating and a $79 price target for Nike.

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

T.D. Cowen analyst John Kernan says that Nike's new CEO has "a hill to climb" in his new role. "We remain Hold rated and see another possibility for consensus growth estimates into FY26 coming down," he wrote.

"The narrative of the Nike brand, however, remains the larger challenge," Kernan added. Key questions for Hill include future channel mix, franchise management and innovation pipeline, as well as the structure of the company's organization around men, women and kids compared with its more traditional organization around specific sports. He must also define the culture within Nike's headquarters and deal with the evolution of the company's supply chain, according to Kernan. T.D. Cowen has a $71 price target for Nike.

Related: Nike's stock sees biggest drop ever as some analysts question company's leadership after downbeat forecast

Of 39 analysts surveyed by FactSet, 19 have an overweight or buy rating, 18 have a hold rating, and two have a sell rating for Nike.

-James Rogers

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09-20-24 1430ET

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