(News Bulletin 247) – The sports equipment manufacturer has announced the departure of John Donahoe, who will be replaced by a company veteran, Elliott Hill. This announcement, which comes at a time of great difficulties for the company with the comma, is well received by the market.

Nike has triggered an electroshock. The sports equipment manufacturer has announced the departure of its CEO, John Donahoe. He will be replaced, as of October 14, by Elliott Hill, a veteran of the group.

Hill spent 32 years at Nike, holding senior positions in Europe and North America, before retiring in 2020.

Eliott Hill is coming out of retirement to take over the reins of the company. To facilitate the transition, John Donahoe will serve as an advisor until the end of January.

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Trailing behind Adidas

The management change comes at a crucial time for Nike. The American group’s shares have fallen 25.4% since the beginning of the year. The company had notably plunged 20% in a session at the end of June, when Nike delivered disappointing quarterly results and prospects.

The company’s transition to new products, including the withdrawal of old items, and the reorientation of its sales channels towards its own stores are all factors that have weighed on its sales and its stock price.

On the contrary, its German rival Adidas has progressed by 18.7% since the beginning of the year. The company with the three stripes had raised its annual outlook last July, driven by its flagship brands.

On Wall Street, however, the market appreciates that Nike has decided to change its boss to revive its momentum. Nike shares jumped 8.6% in pre-opening trading on Wall Street this Friday.

Boosting the morale of the troops

“We believe this highly anticipated leadership change will instill a much-needed sense of urgency, focusing on product innovation, storytelling/marketing and rebuilding wholesale partnerships – areas that suffered under previous management, resulting in material underperformance in terms of profitability and shareholder returns,” Deutsche Bank wrote.

“In addition, the poorly executed restructuring has seriously affected employee morale. However, Elliott Hill’s strong relationships with its internal partners and with retailers should immediately boost morale,” the German bank continued.

In December 2023, Nike announced that it wanted to achieve $2 billion in savings over three years. Then last February, the company decided to reduce its workforce by around 2%, or around 1,600 positions.

“Employees are looking for a fresh start after blaming Donahoe for mistakes made during the pandemic,” Adam Calamar, a portfolio manager at Jensen Investment Management who has held Nike shares since 2011, told Bloomberg.

“Hill represents the hope for a strategic reset and a cultural renewal,” he added.