The world’s largest sporting goods company Nike is struggling with declining sales. A company veteran is now supposed to turn things around again. But how?
Vienna. For Nike it was a coup of a different kind: In the spring, the US sporting goods company announced that it would be allowed to equip the German national soccer team from 2027. A bitter setback for the supplier Adidas – after more than 70 years of national cooperation. But as surprising as the deal may have been for many, Nike probably needs more of it right now. The company recently had difficulty getting back on track.
The company’s sales fell by ten percent to $11.6 billion in the first quarter, and net profit also fell by 28 percent to $1.1 billion. Especially in the largest market, North America, but also in Europe, consumers not only stocked up on fewer shoes, but also on less clothing and equipment from Nike. The China region also painted a similar, although not as drastic, picture. This now means that Nike is faced with weaker results for the full year 2024/2025. Nike had already announced in June that it would not be able to achieve its goals, which gave the stock its worst trading day in over 20 years.
The company is in its most difficult phase in decades, writes the financial news agency Bloomberg. This is also the reason why the group is separating from its board member John Donahoe, who has only been active since 2020. A good two weeks ago it was announced that they wanted to entrust a company veteran with the company’s fortunes in the future. Elliott Hill, who worked for Nike for 32 years, is expected to help the manufacturer regain its former clout from mid-October.
Although Nike is the largest sporting goods company in the world, in recent years under CEO Donahoe it has adopted a strategy that is now falling on the company’s head. Donahoe relied primarily on direct sales, which meant that numerous retail partners no longer sold Nikes. Instead, the company offered its products for sale through its own stores or its app. But the empty space on retailers’ shelves needed to be filled – brands like Hoka from Deckers and On filled the gap.
Tennis legend Roger Federer is also invested in the Zurich shoe manufacturer On. The multiple Wimbledon winner had worked with Nike for 20 years, but then switched to Uniqlo as a brand ambassador for a reported $260 million. While Nike’s wholesale business recently fell comparatively little, namely by “only” eight percent, Nike’s online sales shrank by a whopping 20 percent.
Stock in the basement
Under Donahoe’s chairmanship, Nike managed to break the $50 billion sales mark because of high demand for its Dunks and Air Force 1 lifestyle sneakers. But when the euphoria cooled down – partly because Adidas had recently enjoyed great success with its Samba and Gazelle models – Donahoe was sooner or later forced to introduce cost-cutting measures. Two percent of the workforce or 1,600 employees will have to leave, and costs should fall by around two billion euros in the future. As part of the package, it was also announced that, in addition to the product range, the management would also be thinned out.
Hill, who started as an intern at Nike in 1988, is now set to turn things around on October 14th. The market expects him not only to boost internal motivation, but also to improve relationships with retailers like Foot Locker. “We need to create deeper connections with consumers through sport,” said Nike Chief Financial Officer Matt Friend.
However, Nike shareholders have lost faith in the company, at least temporarily. Since the beginning of the year, the share price has already fallen by around 18 percent; after the current figures were announced, the stock fell by six percent. The company also postponed its first investor day in seven years, scheduled for November 19th. This is intended to give the future board member Elliott Hill the opportunity to examine Nike’s strategy and business trends, as well as to develop plans for Nike’s future, according to the company. In any case, the financial market has high hopes for the new board – but whether Hill can fulfill them remains to be seen.
