Nike CEO John Donahoe comes under fire as stock sees worst day on record

Nike
CEO
John
Donahoe
appears
to
be
on
thin
ice. 

The
former
top
executive
of


eBay,
who
has
been
at
the
helm
of
Nike
since
January
2020,
is
starting
to
lose
Wall
Street’s
confidence
after
the
company
capped
off
a

lackluster
fiscal
year
with
more
bad
news. 

On
Thursday,
Nike
warned
that
sales
in
its
current
quarter
were
expected
to
decline
by
a
staggering
10%
–
far
worse
than
the
3.2%
drop
LSEG
had
projected
–
after
it
posted
its
slowest
annual
sales
gain
in
14
years,
excluding
the
Covid-19
pandemic. 

The
company
also
said
it
expects
fiscal
2025
sales
to
be
down
mid-single
digits
when
it
previously
expected
them
to
grow.

The
warning
signs
led
shares
to
close
20%
lower
on
Friday
—
making
it
the
worst
trading
day
in
the
company’s
history
since
its
IPO
in
Dec.
1980.
The
plunge
wiped
about
$28
billion
off
of
Nike’s
market
cap,
bringing
it
to
just
under
$114
billion
from
$142
billion
a
day
earlier.

As
Wall
Street
digested
the
dismal
outlook
from
the
world’s
largest
sportswear
company,
at
least
six
investment
banks
downgraded
Nike’s
stock.
Analysts
at


Morgan
Stanley
and


Stifel
took
it
a
step
further,
specifically
calling
the
company’s
management
into
question.

“The
FY25
guide
(the
5th
downward
consensus
revision
in
6
quarters),
pushes
prospects
for
growth
inflection
further
into
2025
(perhaps
FY4Q
or
spring
’25
at
the
earliest)
asking
investors
to
both
underwrite
success
of
not
yet
proven
styles
and
look
across
an
uncertain
consumer
discretionary
backdrop
into
2HCY24
until
momentum
could
build
again
into
2HCY25,”
wrote
Stifel
analyst
Jim
Duffy.
“Management
credibility
is
severely
challenged
and
potential
for
C-level
regime
change
adds
further
uncertainty.”

Since
Donahoe
took
over
as
Nike’s
top
executive,
its
stock
is
down
more
than
25%
as
of
Friday’s
close,
significantly
underperforming
both
the


S&P
500
and
the


XRT
–
the
retail-focused
ETF
–
which
saw
gains
of
around
67%
and
66%
in
that
time
period,
respectively.

Nike
finance
chief
Matt
Friend
on
Thursday
attributed
the
guidance
cut
to
a
host
of
factors.
Some,
like
softness
in
China
and
challenging
foreign
exchange
headwinds,
are
outside
of
Nike’s
control,
but
others
are
problems
it
squarely
created
under
Donahoe’s
leadership. 

The
company
is
expecting
wholesale
orders
to
be
slow
as
it
scales
new
styles,
pulls
back
on
classic
franchises
and
works
to
repair
its
relationships
with
key
retail
partners
after
spending
the
last
few
years
cutting
them
off
in
favor
of
a

direct-selling
strategy. 

At
the
same
time,
loyal
customers
who
shop
on
Nike’s
website
are
no
longer
springing
for
new
pairs
of
Air
Force
1s,
Air
Jordan
1s
or
Dunks,
the
company’s
core
franchises.
Critics
say
the
sneaker
lines
have
dominated
the
retailer’s
offerings
for
too
long
and
turned
customers
away
as
they
sought
fresh
styles
and
innovative
designs
from
a
slew
of
upstart
competitors. 

That’s
left
Nike
to
win
back
some
of
its
most
essential
customers
–
runners.
As
the
retailer
focused
on
its
direct-selling
strategy
at
the
expense
of
innovation,
scrappy
competitors
like
On
Running
and
Hoka
snatched
up
market
share.

“It
was
almost
silly
towards
the
end
of
the
call
they
talked
about
running
being
such
a
key
sport
that
consumers
are
taking
part
in.
…
We’ve
known
that
for
a
long
time,
we’ve
known
that
the
consumer
changed
their
mind
post-pandemic,
how
they’re
much
more
active,”
Jessica
Ramírez,
senior
research
analyst
at
Jane
Hali
&
Associates,
told
CNBC,
adding
a
management
change
at
Nike
is
“quite
needed.” 

“Post-lockdown,
we
saw
that
the
consumer
did
adopt
running
and
was
serious
about
that
and
there
was
an
everyday
runner,
and
Nike
didn’t
really
respond
to
that,”
she
said.
“I
think
when
you
have
management
missing
key
consumer
shifts,
there’s
a
problem
with
your
company
…
something
changed
and
they’ve
missed
the
mark.”

Kevin
McCarthy,
a
senior
research
analyst
at
Neuberger
Berman,
told
CNBC’s
Scott
Wapner
on
Thursday
that
the
company
needs
a
change
in
management
and
speculated
that
Donahoe’s
employment
contract
could
soon
expire. 

“Everything
that
you’ve
suggested
is
wrong
with
this
company
seems
to
flow
back
to
execution,
management
and
everything
else,”
McCarthy
said
on
CNBC’s
“Closing
Bell.”

“They’ve
got
a
couple
internal
candidates
right
now
that
are
very
capable
…
you’ve
got
a
couple
ex-Nike
candidates,
too,
that
have
been
in
the
discussion,
and
then
you
also
have
other
competitors
that
have
been
discussed.
But
I
do
think
that
it’s
assumed
that
the
leadership
of
this
company
will
be
changing
over
the
next
six
months.” 

In
fairness
to
Donahoe,
the
Covid-19
pandemic
started
in
earnest
in
the
U.S.
less
than
two
months
into
his
tenure,
and
he’s
had
to
grapple
with
shuttered
stores,

remote
workers
and
a
roller-coaster
ride
of
shifting
consumer
preferences
and
abilities. 

While
the
company’s
stock
may
be
down,
Nike’s
annual
sales
have
grown
some
37%
under
his
leadership
from
$37.4
billion
in
fiscal
2020
to
$51.36
billion
in
fiscal
2024. 

If
you
ask
Phil
Knight,
Nike’s
founder
and
its
chairman
emeritus,
Donahoe
is
doing
just
fine. 

“I
have
seen
Nike’s
plans
for
the
future
and
wholeheartedly
believe
in
them,”
the
86-year-old
told
CNBC
in
a
statement.
“I
am
optimistic
in
Nike’s
future
and
John
Donahoe
has
my
unwavering
confidence
and
full
support.”