What Does Nike’s New CEO Need To Do?

Nike Inc. ousted beleaguered CEO John Donahoe, bringing 32-year Nike veteran Elliott Hill out of retirement to recapture market share lost after what’s seen as a failed direct-to-consumer push.

Donahoe, formerly CEO of software company ServiceNow and eBay as well as worldwide managing director of strategy at Bain & Co., was hired in early 2020 to upgrade the company’s digital sales and engagement approach to elevate one-on-one relationships with consumers. He wound up accelerating a push to reduce or cut ties with long-time wholesale partners in a bid to directly sell and engage consumers and exit “undifferentiated” wholesale accounts.

The move paid off early during the pandemic as online sales surged but eventually enabled long-time competitors such as New Balance and Adidas as well as upstarts, especially Haka and On, to claim shelf space abandoned by Nike as consumers shifted back to in-store shopping.

Innovation efforts were also hampered by Donahoe’s lack of footwear experience. Nike rode a revival of the Dunks line from the ‘80s early in his tenure, but no new lines developed a strong following after demand for Dunks faded. An emphasis on limited-edition sneakers also led to oversupply issues. Donahoe acknowledged in March of this year that Nike missed the benefit third-party retailers provide in scaling launches in the marketplace.

Finally, multiple restructurings and Donahoe’s consulting-centric management style rankled employees, disrupting innovation, go-to-market plans, and morale.

In June, Nike warned that sales are now projected to fall by mid-single digits in its fiscal year that ends May 31, 2025, including a high-single-digit drop in the first half.

To revitalize growth, Nike has been repairing relationships with retailers like Foot Locker, Macy’s, and DSW. Nike also recently pared back the number of releases and is trying to rebuild the strength of its three key classic franchises: Air Force 1, Dunk, and Air Jordan. Last December, Nike announced plans to eliminate $2 billion in expenses over the next three years to be able to reinvest in growth initiatives.

Before retiring in 2020, Hill was president of consumer and marketplace, leading all commercial and marketing operations for Nike and Jordan Brand, including the P&L across the company’s four geographies. 

Hill, who started at Nike as an intern in 1988, will have to overcome competitors’ momentum and the loss of several experienced designers and other executives.

"I know things haven't been easy, and we certainly have taken our fair share of shots," Hill said in a note to employees, which also included a video message, as reported by Bloomberg.

In the video message, he told employees they would need to "rally as a team" and "move with speed and a sense of urgency."

Executive Chairman and former CEO Mark Parker said in a statement, “The board concluded it was clear Elliott’s global expertise, leadership style, and deep understanding of our industry and partners, paired with his passion for sport, our brands, products, consumers, athletes, and employees, make him the right person to lead Nike’s next stage of growth.”