Wall Street reacts to the CEO change

Forbes Australia

Nike shares jumped Friday as investors responded positively to a reshuffling at the sneaker giant’s top leadership post, as investors hope incoming CEO Elliot Hill can reverse the fortunes of the stock under incumbent John Donahoe.
That’s how much Nike stock returned to investors from when Donahoe took the helm through Thursday’s close, compared to an 87.3% return for the S&P 500, according to FactSet data, accounting for dividends.
It was also a down stretch for competitors like Adidas (-26.6% return over the period) and Lululemon (10.4%).
The end of Donahoe’s tenure as Nike CEO, which followed stints as the top executive at software firm ServiceNow and online resale platform eBay, coincides with dismally low expectations for Nike in its fiscal year ending May 2025.
Bernstein analyst Aneesha Sherman said Thursday of Donahoe’s doomed tenure: “The blame seems to fall solely on CEO John Donahoe’s lack of a product/sports background, which hampered his ability to make product decisions.

NEGATIVE

Investors were happy to see a change at the top of Nike’s leadership hierarchy on Friday, and they hope that new CEO Elliot Hill will be able to turn around the company’s stock price under outgoing CEO John Donahoe. Conversely, Nike’s stock price plunged.

High Number.

160.5 percent. That is the amount of money investors received back in Nike stock from the time Donahoe assumed leadership until Thursday’s close, as opposed to an 87.3% return for the SandP 500, factoring in dividends, according to FactSet data. Rivals like Adidas (-26.6% return during the period) and Lululemon (10.4% return) also had a difficult stretch.

What Did Not Go Right Under Donahoe?

Nike’s fiscal year ending in May 2025 is expected to be extremely disappointing, and Donahoe’s departure as CEO of the company comes after periods as the company’s top executive at online resale marketplace eBay and software company ServiceNow.

According to consensus analyst estimates, Nike is expected to report a staggering 21.8 percent decline in profits over the course of the next year, as well as its first year-over-year decline in revenue since 2010 (aside from the pandemic-affected 2020). Nike has had to contend with more significant problems recently, such as a more competitive battle for market share in the crowded sportswear industry and dwindling sales in its vital China business as numerous Chinese retailers struggle. However, observers linked Nike’s troubles to a shaky reputation for their brand.

There was a lot of criticism directed towards Donahoe’s leadership, with many citing his strategy of severing ties with retail partners and moving away from innovation in the company’s sneakers and athletic wear (Bloomberg published a feature story titled “The Man Who Made Nike Uncool” last week).

Regarding Donahoe’s disastrous tenure, Bernstein analyst Aneesha Sherman stated on Thursday: “It appears that CEO John Donahoe’s lack of experience with products or sports really hurt his ability to make decisions about products. In our opinion, the problem was not Donahoe’s inability to make decisions about the product himself, but rather the corporate emphasis on product shifting. “.

Crucial Quote.

The market will be more understanding under a new leader, but the turnaround will take time, Sherman wrote. Nike’s stock fell 20% in June to a 4-year low after the company revealed it expected a 10% annual decline in sales for the quarter ending in August, a move that clearly indicated Wall Street’s impatience with the company’s latest financial results.

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