Less than two weeks after Nike Inc. parted ways with its CEO John Donahoe, the sneaker giant’s stock is looking up. The rise in stock price is a sign that investors see the company rebounding from its current struggles.
Nike’s stock rose more than 10% in the twelve days following the departure of its CEO on September 19.
The iconic sneaker brand announced that Donahoe would step down after a disappointing five-year tenure. He will be replaced by Elliott Hill, who had been at the company for more than thirty years. Hill is poised to correct some of Donahoe’s mistakes to get the company back on track.
“It’s expected Hill will make it a priority to get back into the good graces of wholesale retailers,” said David Swartz, a senior equity analyst who covers specialty retailers for Morningstar. “It’s also expected he’ll get the innovation cycle back on track.”
Donahoe made two major mistakes as leader of the company. First, he pulled the brand out of major wholesale retailers, like Foot Locker, Macy’s and DSW, to focus on direct to consumer sales. At the start of the pandemic, this worked, as consumers were buying online. But when stores opened up again, consumers returned to in-person shopping. Nike went missing from the shelves, and consumers became loyal to other brands. Second, Nike stopped leading the charge with innovation. Asics, On, and Hoka were making innovative products that runners and non-runners loved, and Nike was left in their dust.
The iconic brand’s stock has plummeted 13% in the past year. Their peers, like Asics and Decker’s (who make Hoka), are up 130% and 84% respectively during that same time frame.
Nike’s split from Donahoe was a first step in righting the ship. Investors think the change might be able to catalyze a comeback.
“I am optimistic that Nike will get through this difficult period,” said Swartz. “The company still has the talent and the products. I still think Nike has a lot of positives despite their recent problems.”