John Donahoe attends the first day of the annual Allen & Co. Sun Valley Conference in Sun Valley, Idaho.
Drew Angler | Getty Images
Nike Chief Executive John Donahoe appears to be treading on thin ice.
former top executive eBayHe, who has been at the helm of Nike since January 2020, began to lose Wall Street’s confidence as the company ended a dismal fiscal year with more bad news.
Nike warned on Thursday that sales are expected to fall 10% in the current quarter, well below LSEG’s forecast of a 3.2% decline, after posting its slowest annual sales growth in 14 years, excluding the Covid-19 pandemic. amplitude.
The company also said it expects sales to fall by mid-single digits in fiscal 2025, compared with previous expectations for sales growth.
Shares of Nike plunged 20% on Friday, the day after the quarterly report was released. The company’s market capitalization was last estimated at $114 billion.
At least six investment banks have downgraded Nike stock as Wall Street digests a bleak outlook for the world’s largest sportswear company. analyst Morgan Stanley and Stiefel Go a step further and specifically question company management.
“FY2025 guidance (the 5th downward consensus revision in 6 quarters) pushes the prospect of a growth inflection point further into 2025 (possibly as early as Q4FY25 or spring 2025), requiring investors to both underwrite The success of the style, which is yet to be proven, also looks at uncertainties. “The credibility of management is seriously challenged, and the possibility of a regime change at the top adds further uncertainty. “
Nike stock has lagged the S&P 500 during Chief Executive John Donahoe’s tenure.
Since Donahoe took over as CEO of Nike, the company’s stock price has fallen about 25% as of Friday’s intraday trading, significantly underperforming Nike’s stock price. S&P 500 Index and XRT – retail-focused ETFs – are up about 69% and 67% respectively during the same period.
Nike Chief Financial Officer Matt Friend on Thursday attributed the guidance reduction to a number of factors. Some of these issues, such as weakness in China and challenging foreign exchange headwinds, are beyond Nike’s control, but others are a direct result of Donahoe’s leadership.
The company expects wholesale orders to slow as it expands new styles, withdraws classic franchises and works to repair relationships with key retail partners it had severed in previous years with its direct-sales strategy. Partnerships with key retail partners.
Meanwhile, loyal customers who shop on Nike’s website are no longer keen on buying new Air Force 1s, Air Jordan 1s or Dunks (the company’s core franchises). Critics say the sneaker line has dominated the retailer’s offerings for too long, shutting out customers as they seek fresh styles and innovative designs from a host of emerging competitors.
This allowed Nike to win back some of its most important customers – runners. As retailers focus on direct sales strategies at the expense of innovation, scrappy rivals such as On Running and Hoka steal market share.
“At the end of the call, they talked about running being an important sport for consumers to participate in, which is almost silly… We knew early on that we knew consumers were changing their minds post-pandemic,” said Jane Hali & Associates, senior “How they can become more active,” research analyst Jessica Ramírez told CNBC, adding that Nike is “very much in need” of management changes.
“After lockdown, we saw consumers really starting to run and taking it seriously and having people running every day, and Nike didn’t really respond to that,” she said. “I think you have problems in your company when your management misses key consumer shifts… Something changes and they miss the point.”
Kevin McCarthy, senior research analyst at Neuberger Berman, told CNBC’s Scott Wapner on Thursday that the company needs a management change and speculated that Donahoe’s employment contract could expire soon.
“Everything you say is wrong with this company seems to go back to execution, management and everything else,” McCarthy said on CNBC’s “Closing Bell.”
“They have several very capable internal candidates right now… and a couple of former Nike candidates that are already in discussions, and then there are other competitors that are already in discussions. But I do think the company ‘s leadership will change over the next six months.
To be fair, Donahoe was less than two months into his tenure when the Covid-19 pandemic officially began in the United States, and he had to deal with store closures, remote workers, and changing consumer preferences and capabilities. Roller coaster and other issues.
Although the company’s stock price may have fallen, under his leadership, Nike’s annual sales grew by about 37%, from $37.4 billion in fiscal 2020 to $51.36 billion in fiscal 2024.
If you ask Nike founder and chairman emeritus Phil Knight, Donahoe is doing pretty well.
“I have seen Nike’s plans for the future and believe in them wholeheartedly,” the 86-year-old told CNBC in a statement. “I am optimistic about Nike’s future and John Donahoe has my firm belief in them.” Confidence and full support.”
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