Nike’s turnaround will take longer than expected under new CEO Elliott Hill, who outlined his strategy to return the company to growth after blaming deep discounting for declining revenue and profit. The sneaker giant has been relying on promotions to drive sales and plans to return its online business to a full-price model. However, it will first need to aggressively liquidate old inventory through less profitable channels, according to Hill and finance chief Matt Friend.
Hill mentioned that the lack of newness in product and uninspiring stories have softened traffic in Nike’s direct, digital, and physical platforms. The company had become too promotional, impacting its brand and disrupting the marketplace and partners’ profitability. Nike expects gross margins to decrease by 3 to 3.5 percentage points during the holiday quarter, with sales anticipated to decline by low double digits, worse than analysts’ expectations.
Despite low expectations, Nike exceeded Wall Street’s expectations in its most recent quarter. The company reported a net income drop to $1.16 billion and sales fell to $12.35 billion. Hill, who rejoined Nike after leaving in 2020, aims to revitalize the company by refocusing on innovation, market share, and selling strategies. He emphasized rebuilding trust with wholesale partners and reigniting the brand’s focus on athletes and performance.
Hill criticized the strategies of his predecessor, John Donahoe, particularly the emphasis on online sales and neglect of wholesale partners. Nike aims to support partners like Foot Locker, JD Sports, and Dick’s Sporting Goods to drive sales. The company also plans to reduce supply of certain shoe styles to maintain brand appeal. Despite challenges, Nike saw better-than-expected results in most regions except China, where sales declined. Converse, a Nike subsidiary, also experienced a sales decline during the period.
Since Hill’s appointment, Nike has secured wins, including renewing its contract with the NFL through 2038. The company remains the exclusive uniform provider for major sports leagues. Nike’s shares were down in 2024, contrasting with the S&P 500’s gain.
