Nike’s experiment with having a company outsider in the CEO role is over.

The company announced Thursday afternoon that current CEO John Donahoe, who has overseen multiple rounds of layoffs and weak financial results during his tenure, is retiring Oct. 13.

The new CEO is 30-year Nike veteran Elliott Hill, who has held senior leadership positions across Europe and North America and was responsible for helping grow the business to more than $39 billion until he retired in 2020. He will return to the top job at the company Oct. 14. Hill started at Nike as an intern.

“Elliott Hill is the perfect choice to get Nike back on the right track,” said sporting goods analyst and consultant Matt Powell, a long time Nike follower. “He knows the business from the ground up, and was there in the tough times. Hill is widely respected inside and outside the berm. There are no quick fixes and the turnaround will take time, but Hill is the guy to make it happen.”

Before retiring, Hill held the position of president – consumer and marketplace, leading all commercial and marketing operations for the Nike and Jordan brands, including the P&L across the company’s four geographies, according to the company.

“Given our needs for the future, the past performance of the business, and after conducting a thoughtful succession process, the board concluded it was clear Elliott’s global expertise, leadership style, and deep understanding of our industry and partners, paired with his passion for sport, our brands, products, consumers, athletes, and employees, make him the right person to lead Nike’s next stage of growth,” said Mark Parker, Executive Chairman of Nike, Inc., who served as Nike CEO for 14 years before Donahoe moved into the position. “Personally, I have worked with Elliott for more than 30 years and I look forward to supporting him and his senior management team as they seize the opportunities ahead.”

Donahoe became Nike CEO in 2020 after sitting on the Nike board of directors since 2014. He came from the tech world, having previously served as president and CEO of ServiceNow and of eBay Inc.

Nike tends to perform well in all sorts of economic climates, but that was not the case under Donahoe. The company has posted disappointing results for several years, and competitors such as Hoka, On, and New Balance are gaining market share and capturing consumers’ attention. Nike went through several rounds of layoffs, with a lot of institutional knowledge leaving the building. And most importantly, Nike has failed to innovate during Donahoe’s tenure, Powell said.

In May of this year, Powell described Nike’s problems this way in an SES story about Hoka gaining market share.

“You could look further at all the controversy at Nike right now –  the mismanagement, they’ve gone in the wrong direction with initiatives, and they’re having to walk back a lot of the things that have been put into place a few years ago,” Powell said. “Nike’s business is not very good. What growth Nike is getting today, they’re really driving by being very promotional on nike.com, and in their own stores.”

“I’m not suggesting that Nike (with $51 billion in annual revenue) is going away,” he added. “But they are clearly shedding share. And that’s something we haven’t seen here in the U.S. for at least 40 years or so. So this is a big change.”

Nike reported grim results in its most recent quarterly reporting for the period ended May 31.

A significant decline in key lifestyle franchises such as Air Force 1 in Nike’s direct business was a major factor in the company reducing its outlook for its current fiscal year, which started in June.

The company said during the earnings call in June that it planned to aggressively reduce inventory in the Air Force 1, Dunk, and Jordan 1 franchises, especially in its direct business, to better align supply and demand.

Nike had been expecting to grow revenue in the current fiscal year, but is now forecasting a mid-single digit decline.

In Q1, revenue is expected to fall 10% due to the drop in lifestyle sales as the company reduces inventory, which will hurt digital sales. Wholesale order books for Q1 are also “muted” because many of the newer innovations won’t scale until the second half of the year, CFO Matthew Friend said on the June earnings call.

Nike is due to report Q1 earnings Oct. 1.

Donahoe’s departure could help in Nike’s quest to revamp its business, Powell said.

“The missteps under Donahoe created this situation,” he said. “I’m glad that he is stepping aside.”

 

 

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