New York (TDI): Nike is undergoing a significant transformation as a result of growing competition and strategic mistakes on its part.
Elliott Hill, an expert former Nike executive, is expected to replace CEO John Donahoe, who is set to retire next month, the athletic giant revealed on Thursday.
In Thursday’s after-hours trade, Nike’s shares increased by 9%. This year, Nike’s stock has already decreased by 24%.
Nike is fighting against fierce competition from emerging running brands like Hoka and On as well as a decline in consumer demand.
Consumers are shifting their spending patterns; they are substituting pleasures like concerts and travel for necessities like pricey footwear and sportswear.
The CEO move at Nike was much-needed, as many analysts and investors had been calling for it.
Nike Concerns On Falling Revenues
The retailer projected that as Nike’s traditional brands slow down, the company’s revenues, which were flat the previous quarter, will decline by an additional 10% the following quarter.
Analysts have chastised Nike for producing too few inventive new footwear.
Also read: Hyundai, GM Unite for Future Automotive Solutions
In a letter to clients on Wednesday, Oppenheimer analyst Brian Nagel stated that Nike “turned more lax on product innovation, particularly in running, as up and coming brands started to resonate.”
In a note published on Thursday, Nagel stated that Nike’s board’s decision to pursue a turnaround with Hill’s nomination “signals a much more significant commitment.”
In an effort to divert consumers to its own channels, particularly online, the corporation has reduced the number of traditional merchants that carry its products in recent years.
Nike claims that selling products on its own online and in-person locations may generate more than twice as much profit as selling through wholesale partners.
Nike has implemented a plan to concentrate its marketing efforts and premium merchandise on a small number of 40 carefully chosen retail partners, including Dick’s Sporting Goods and Foot Locker.
However, Nike’s sales suffered as a result of the change’s haste. Since then, Nike has reinstated a number of the stores it had previously dropped.
Also read: US Bans Networks Transferring Money for Russia and N Korea
In a June note to clients, GlobalData Retail analyst Neil Saunders stated that Nike had gone too far and undervalued the significance of third-party shops.
Nike faces comparable challenges as other well-known athletic firms like Lululemon and Under Armour.
This year, shares of Under Armour have decreased 8%, while Lululemon’s stock has plummeted 46%.
