Nike's new CEO plans to go back to basics in brand overhaul effort (updated)

Foot Locker

20/12/2024 11:05

(Adds details on retail partnership in paragraphs 7-8, graphic)
    By Nicholas P. Brown and Ananya Mariam Rajesh
       Dec 20 (Reuters) - Nike's  NKE.N  new CEO Elliott Hill
warned of a long road to sales recovery for the sportswear
giant, but the veteran executive's plan to turn the spotlight on
sports like basketball and running, allayed some investor
worries.
    The company said on Thursday it was expecting third-quarter
revenue to drop to low double digits after the embattled
sportswear seller's quarterly results beat market estimates.
    Hill, in his first public address as CEO on the
post-earnings call, said Nike had "lost its obsession with
sport" and vowed to put it back on track by refocusing on sport
and selling more items at premium prices.
    "The recovery is going to be a multi-year process, but
he(Hill) seems to be going back to the roots, back to Nike being
Nike," said John Nagle, chief investment officer at Kavar
Capital Partners, which owns Nike shares.
    "(Hill plans to shift focus) away from some of the
streetwear and fashion that had taken over the brand, the heavy
discounting and the neglect of retailers. Just taking it back to
what worked," Nagle said.
    Hill, who was with Nike for more than three decades,
returned as CEO in October to revive demand at the firm that has
been struggling with strategy missteps that soured its relations
with retailers such as Foot Locker  FL.N .
    Earlier this month, Foot Locker CEO Mary Dillon said Hill
was "taking the right actions for the brand" and  the retailer
was "working closely" with Nike to emphasize newer sportswear
styles, including Vomero and Air DT Max.
    "(The retailers) they want us to get back to being Nike, and
they want us to have the unrelenting flow of innovative
products... and they want us to get back to delivering bold
brand statements that help drive traffic," Hill said.
    The company's market share dwindle as rival brands,
including Roger Federer-backed On  ONON.N  and Deckers' Hoka
 DECK.N , lured consumers with fresher and more innovative
styles.
    Hill also highlighted that a lack of newness led Nike to
become too promotional and said he plans to shift to selling
more at full price on its website and app. 
    Shares of Nike, which have lost about half of its value in
the last three years, were down about 4% in premarket hours on
the muted forecast as some analysts expect short-term margin
pressure.
    "With another half year of franchise management coupled with
investment to reinvigorate the brand, we believe the next four
quarters could be the worst of the margin erosion and earnings
per share reductions," Barclays analyst Adrienne Yih said.
    Nike's forward price-to-earnings ratio for the next 12
months, a benchmark for valuing stocks, was 27.53, compared with
33.47 for Deckers  DECK.N  and 32.32 for Adidas  ADSGn.DE .
    "A rudderless ship now has a rudder, and a sailor who knows
how to drive it," said Eric Clark, portfolio manager at the
Rational Dynamic Brands fund, which owns Nike shares.

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Nike withdraws annual forecast, signals weak holiday season   
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Nike veteran Hill to replace Donahoe as CEO; shares jump   
 urn:newsml:reuters.com:*:nL1N3L200U
Nike lags footwear rivals over the last three years    https://reut.rs/4fr5CwX
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 (Reporting by Nicholas P. Brown in New York and Ananya Mariam
Rajesh in Bengaluru; Writing by Aishwarya Venugopal; Editing by
Arun Koyyur)
 ((Aishwarya.Venugopal@thomsonreuters.com;))