Nike CEO John Donahoe is facing criticism from Wall Street after the company reported lackluster sales and a dismal outlook for the current quarter. The sportswear giant warned that its sales in the current quarter are expected to decline by 10%, far worse than projected. This news led to a 20% drop in Nike’s stock value.
Several investment banks downgraded Nike’s stock in response to the poor outlook, with analysts expressing concerns about the company’s management. Stifel analyst Jim Duffy stated that “management credibility is severely challenged,” and there is potential for a C-level regime change.
Since Donahoe took over as CEO, Nike’s stock has underperformed compared to the S&P 500 and the XRT retail-focused ETF. Nike’s stock is down about 25%, while the S&P 500 and XRT saw gains of around 69% and 67% respectively.
Nike’s finance chief, Matt Friend, attributed the guidance cut to various factors, including softness in China, challenging foreign exchange headwinds, and problems created under Donahoe’s leadership. The company’s direct-selling strategy and focus on classic franchises like Air Force 1s and Air Jordan 1s have turned customers away as they seek fresh styles and innovative designs from competitors.
Critics argue that Nike needs to win back its essential customers, particularly runners, as competitors like On Running and Hoka have gained market share with their innovative offerings. Jessica Ramírez, senior research analyst at Jane Hali & Associates, believes that a management change at Nike is necessary, stating that “when you have management missing key consumer shifts, there’s a problem with your company.”
Kevin McCarthy, a senior research analyst at Neuberger Berman, also believes that a change in management is needed. He suggests that Donahoe’s employment contract could soon expire and speculates that there will be a leadership change within the next six months.
Despite the criticism, Donahoe has received support from Nike’s founder and chairman emeritus, Phil Knight. Knight expressed his confidence in Donahoe and the company’s future plans, stating that he has “unwavering confidence and full support” in Donahoe.
While the Covid-19 pandemic has presented challenges for Nike, including store closures and shifting consumer preferences, the company’s annual sales have grown 37% under Donahoe’s leadership. However, there is a growing consensus among analysts and industry insiders that a change in management is necessary to address the company’s current issues and adapt to changing consumer demands.
