NEW YORK: When Nike brought Elliott Hill out of retirement in October 2024, investors hoped the company veteran would quickly reverse years of product missteps, rebuild relationships with wholesalers and restore the sportswear giant’s lost momentum.
Two years on, Nike’s market value and earnings have more than halved, while many of the problems Hill was hired to fix – from weakness in China to over-reliance on discounted lifestyle products – continue to weigh on the business.
The unfinished turnaround was on display again last Thursday when Nike announced another round of job cuts and forecast steeper-than-expected declines in sales and profit for the fiscal year ending in May 2028.
“Things are going to get worse before they get better,” RBC Capital Markets analyst Piral Dadhania said.
That timeline was reinforced by Nike’s disclosure that most of the savings from its overhaul will not be realised until fiscal 2029 and 2030. Nike last Thursday once again flagged performance in sportswear, China and its legacy Jordan brand as problem areas. Together, they accounted for more than half of total sales.
Nike’s turnaround challenges have become a test of investor faith in chief executive officer or CEO Hill’s strategy ahead of its investor day on Nov 16 and 17, where analysts expect the company to provide a clearer roadmap for restoring growth and profitability.
Hill was brought back to steady a company that had lost its footing under a strategy that prioritised direct sales and reduced ties with wholesale partners, while leaning heavily on a shrinking roster of lifestyle products instead of its core sports strategy.
Since returning, he has moved to rebuild relationships with retailers, refocus product development on sports and simplify operations. Yet revenue continues to decline across wholesale and direct channels.
“Nike really needs to show that it can at least bail out problems faster than taking them on,” said Neil Saunders managing director of GlobalData.
“The job cuts and associated cost-cutting will buy time and may support margins and the bottom line - but these things are not the solution to the brand problems that are the cause of decline,” he said. — Reuters
