‘Sport as our North Star’
New Nike CEO unveils turnaround plan
Nike’s second-quarter revenues dropped 9 per cent, better than expectations. Shares ticked up as new CEO Elliott Hill broke down his turnaround plan.
By Madeleine Schulz, December 20, 2024, VOGUE Business
New Nike President and CEO Elliott Hill detailed his near-term plan for the sportswear giant’s big turnaround. The approach: restart product innovation, rebuild wholesale and reinvigorate marketing efforts with amped-up, athlete-focused storytelling — all with sport at the centre.
“In my first call, I want to start by saying how energised I am to be back at Nike working alongside my teammates,” Hill said. “I have an irrational love for this company. I know Nike inside and out, take pride in what the brand stands for and want to see the company succeed. In a moment where our team brand and business are being challenged, my singular focus is to help get us back on track to get back to winning.”
Hill’s remarks coincided with Nike’s second-quarter earnings, announced Thursday, 60 days into his tenure as CEO. Nike revenues were down 9 per cent year-on-year to $12.4 billion for the second quarter of fiscal 2025 (on a constant currency basis), faring better than analysts had anticipated. Shares rose 0.6 per cent in after hours trading.
Thursday marked the first time the new CEO, who was appointed to the role in September, addressed his turnaround plan, including a detailed agenda of immediate moves to reposition the business.
Nike is in need of a win off the back of a tough year. The company missed expectations last September for the first time in two years, and has gone through layoffs and the dismissal of former CEO John Donahoe in the time since. In Q2, Nike’s direct-to-consumer revenues were $5 billion, down 14 per cent year-on-year. Nike’s digital sales were down 21 per cent; stores down 2 per cent. Wholesale revenues were $6.9 billion, down 4 per cent. “Q2 marketplace trends largely reflected the challenges that Elliott outlined, with traffic and retail sales across the marketplace falling below our expectations, especially in September and October,” said CFO Matt Friend.
Elliott Hill’s path to success is relatively clear, experts say. We break down what the brand needs from him to get back on top.
By region, North America revenues were down 8 per cent to $5.2 billion. EMEA was down 10 per cent to $3.3 billion; Greater China down 11 to $1.7 billion; and Asia Pacific & Latin America down 2 to $1.7 billion.
Hill, a retired former Nike executive who spent 32 years at the company, has spent his first two months as CEO on the road, meeting with wholesale partners; commissioners of leagues including the NFL, NBA and WNBA, MLB and the National Women’s Soccer League (NWSL); heads of NCAA conferences and teams; and athletes from Michael Jordan to Christiano Ronaldo to Serena Williams. He also visited distribution centres and met with Nike’s manufacturing partners. “It was important to me that I spent my first 60 days personally collecting these deep and direct insights,” Hill told investors.
The CEO led on a high-level observation. “We lost our obsession with sport,” he told investors. This informs Nike’s strategy henceforth. “Moving forward, we will lead with sport and put the athlete at the centre of every decision,” Hill said. “The sharpness in each sport is what differentiates our brand and our business and fuels our culture.”
Near-term action: “We’re gonna move fast”
On the call, Hill outlined his near-term plan to get Nike back on track.
Ignite culture through a focus on obsessing over sport and getting back to winning
This is a direct response to Hill’s key observation of Nike’s loss of obsession. “With sports as our North Star, we will re-energise our culture and identity,” he said. This first step –?which includes clearing out the marketplace of products that don’t fit the bill – lays the groundwork for his more specific agenda items.
Accelerate a complete product portfolio
Nike is shifting into sport-led teams segmented by men’s, women’s and kids. The brand dubs each of them “fields of play”, which Hill characterised as a “segment to grow” approach. “We will do this by empowering more nimble cross-functional teams to assess the needs of sports-specific athletes by gender,” he said. Hill’s time at Nike previously was characterised by disciplined franchise management, he said —?the goal is to get back to this.
This approach will be driven by athlete insights, Hill added. “We will get back to leveraging deep athlete insights to accelerate innovation, design, product creation and storytelling.” Hill is optimistic about the innovation across Nike’s field of play in the next several seasons, especially in high-volume areas like running, training, sportswear and the Jordan brand.
Increase investment in the Nike brand to deliver bold marketing statements
The goal is to balance major global marketing moments and day-to-day efforts in local communities. “To do that, we’re going to be much more intentional about investing to move the brand forward,” Hill said.
He highlighted key moments from Nike’s last quarter, including the New York Liberty winning the WNBA championship and city takeovers for the Berlin, Shanghai, New York City and Chicago marathons. In the last 60 days, Nike announced the re-signing of the NBA and WNBA; Brazil Football Federation; FC Barcelona; and, just last week, the NFL. Hill called the organisations’ athletes “the creative fuel for our brand”. Hill also highlighted the importance of showing up in communities that run, train and compete at the local level. “It’s about showing up and building relationships every day with athletes and influencers,” he said.
Invest in and empower teams in key countries and cities
Referencing his years working in as president of geographies for Nike, Hill flagged the need to invest in specific regions. “We will resource our key country and key city teams to create stronger consumer connections, build relationships with athletes, influencers and partners, and unlock incremental growth for our brand and business,” he said. Of Nike’s 12 key cities across 10 key countries (New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan), it will start with three key countries and five cities, Hill said. (He didn’t specify which on the call.)
Elevate the marketplace
Prioritising Nike’s digital revenue has negatively impacted marketplace health, Hill acknowledged, driving competition with wholesale partners instead of collaboration. Traffic has softened due to lack of newness in product and inspiring stories, driving Nike to become overly promotional, Hill said. “The level of markdowns not only impacts our brand, but it disrupts the overall marketplace and the profitability of our partners,” he said.
To remedy this, the plan is to build back a more premium, integrated marketplace across Nike Direct and wholesale. “Our marketplace will be consumer-led,” Hill said. “Putting our product and presentation in the path of the consumer wherever they choose the shop.” To do so, Hill is working to build back the trust of wholesale partners, who he says feel Nike has turned its back on them. (He’s met with partners including Dick’s, JD Sports, Foot Locker and more during his first quarter.) Hill flagged running and football speciality stores as in need of particular investment.
Looking ahead
The execs noted that these steps will impact near-term results. “The net effect of these actions will result in lower revenue, additional gross margin pressure and higher demand creation expenses.” Friend said. But, Hill said, Nike is taking a long-term view. “We’re making the decisions that are best for the health of our brand and business,” he said. As Bernstein analyst Aneesha Sherman said at the time of Hill’s appointment, the market will be more forgiving under a new CEO. She estimated a resolution around the first half of fiscal 2026.
Nike expects third-quarter revenues to be down low double-digits. “This reflects initial steps on the actions outlined above, as well as worsening foreign exchange headwinds,” Friend said. He expects a greater headwind in the fourth quarter than the third due to the timing of implementing these actions across different geographies and timelines.
Hill is optimistic about Nike’s long-term trajectory. “It’s been an incredibly rewarding first two months,” he said. “This isn’t going to be easy, but we’re ready for the challenge.”
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