Key Takeaways
- Incoming Nike CEO Elliott Hill will face a number of challenges, including concerns about the “newness” of Nike’s products, rising competition and persistent headwinds in China.
- Analysts say next week’s quarterly earnings release and Nike’s investor day, scheduled for Nov. 19, could be catalysts for the stock.
- The company previously said it expects a sales hit in the quarter as it shifts its strategy to a focus on newer products, and amid weakness in its digital and international sales.
Nike’s (NKE) stock price has been on a tear since the global shoe and athletic apparel company named Elliott Hill as its CEO last week.
While the stock has gained nearly 9% since the announcement Thursday, it’s still down nearly 20% since the start of the year as Nike confronts an array of challenges. Here are three key issues that the new CEO will need to tackle when he steps into the role in mid-October.
A ‘Newness’ Problem
Nike’s sales have disappointed in recent quarters, and the stock took a substantial hit after the company warned in June during its fiscal fourth quarter earnings call that lower discretionary spending from many consumers meant that revenue would likely fall by 10% year-over-year in the first quarter of fiscal 2025. Nike is set to those quarterly results next Tuesday.
The company said it expects to take a sales hit in the quarter as it shifts its strategy to a focus on newer products, and amid weakness in its digital and international sales. JPMorgan analysts on Monday lowered their projections for Nike, citing a number of concerns, including “muted wholesale orderbooks as newness was not planned to scale until Spring calendar ‘25 at the earliest.”
‘Persistent Macroeconomic Headwinds’ in China
Part of the projected sales weakness is because of “persistent macroeconomic headwinds” facing Chinese consumers, the analysts wrote. They said their research has shown Nike didn’t receive its typical Olympics-associated sales bump in China, and said several lower-cost options are increasingly available to Chinese customers.
Bank of America analysts also said they have seen “continued signs of weakening” sales in China, including cautious comments from Chinese retailers and other apparel companies in recent weeks.”
Reclaiming Lost Market Share
Nike has faced growing competition across its various segments in recent years, as athleisure brands like Lululemon (LULU) and footwear makers like Hoka parent Deckers Outdoor’s (DECK) have taken market share.
Deutsche Bank analysts said they see Nike displaying a “sense of urgency” to reclaim that lost market share with the CEO change, and said they are encouraged by the company’s “back to basics” focus on running and performance apparel.
The analysts said key upcoming catalysts could be next week’s earnings, and Nike’s investor day scheduled for Nov. 19.