Nike on the way back to its sporting roots: The strategy of the new CEO

The announcement of Nike's new CEO Elliott Hill promises nothing less than a fundamental return to the athletic roots of the sportswear giant. Hill, an experienced veteran of the company, foresees a protracted path to revenue recovery, which nonetheless gives some investors hope. His focus is on giving more attention to sports such as basketball and running, which slightly alleviates investors' concerns. Last Thursday, the company announced that it expects a revenue decline in the low-double-digit range for the third quarter. This forecast followed impressive quarterly results that exceeded market expectations. Hill, in his first public address as CEO, emphasized that the company had "lost its enthusiasm for sports," and plans a refocus on athletic innovation and a sales strategy more oriented toward premium pricing. This move does not come without support. John Nagle, Chief Investment Officer at Kavar Capital Partners, noted, "Hill seems to be taking Nike back to its roots, shifting the focus from streetwear and fashion, which had overtaken the brand, back to what worked." This restructuring also involves close collaboration with retailers like Foot Locker to emphasize new sportswear styles. The challenge remains, especially in the face of increasing competition from brands like On, supported by Roger Federer, and Deckers' Hoka, which are dazzling with innovative designs. Hill plans to change sales behavior and rely less on discounts to strengthen direct sales through the company's website and app. Nevertheless, skepticism remains. Barclays analyst Adrienne Yih anticipates further difficult quarters and declining margins. Several brokerage houses have lowered price targets as a clear timeline for Nike's return to growth is still forthcoming.