Shares collapse awaiting CEO change

Nike faces one of their worst streaks in decades. The sneaker maker announced worse-than-expected results on Tuesday and decided to cancel its sales forecasts for the entire year called “guidance” in financial jargon. It had already reduced them in the previous quarter.

The justification for that move, which left investors without an annual estimate of the company’s numbers, was the arrival of a new CEO Elliott Hill, on October 14, replacing John Donahoe. But that explanation did not calm the market: the company’s action it collapsed 7% this Wednesday, and then cut the fall to 5%, to US$ 84.50.

rose 15% to $1.2 billion during the quarter.

Nike also postponed its allotted day to speak with investors, scheduled for November, to give Hill more time to develop his turnaround strategy.

The market hopes that the new CEO will inspire staff who have lost faith in the company’s trajectory. It will also have to accelerate the development of new products.

Removing the full-year outlook “provides Elliott with the flexibility to reconnect with our employees and teams, evaluate current business strategies and trends, and develop our plans to better position the business,” said CFO Matt Friend, in a call with analysts.

Sales for the fiscal first quarter (ended Aug. 31) fell 10% to $11.59 billion, just below the average analyst estimate. The declines were especially pronounced in North Americaas well as in Europe, Africa and the Middle East, while the problems persisted problems in the Converse brand.

Nike hopes that revenues fall between 8% and 10% in the second quarter, before the trend improves.

As of Tuesday, the company’s shares had already fallen 18% this year, compared with a 20% gain for the S&P 500 index. Jefferies analysts warned that the stock’s losses were likely to continue even after Hill would join.

“Nike has been warning us that the sportswear market is not very strong and that its innovation cycle was also not looking particularly good for the start of fiscal 2025“said David Swartz, an analyst at Morningstar. “Right now, Nike is in a situation where not many new products come out and is removing some others.”

Regarding the change in CEO, Adam Calamar, portfolio manager at Jensen Investment, assured that “it is important to understand that significant changes do not occur overnight, especially in a company of the size and complexity of Nike.”

However, pressures are easing in some areas: Sales in China and the major countries under its influence exceeded analysts’ expectations, and the 4% drop there was the smallest among the company’s regions. Nike said the new products are selling well in China, including Pegasus 41 running shoes and classics like Jordan.

Hill, a Nike veteran who started as an intern decades ago, will come out of retirement to assume the top job. His predecessor, John Donahoe, had become the company’s CEO in 2020, when sales were soaring, but he oversaw Nike during the years. most tumultuous years in the half century of the company’s history.

Donahoe had tried to increase sales at Nike stores and on its website by significantly reducing the number of shoes the company shipped to retailers. But demand for its sneakers plummeted last year, while emerging brands like Yes, Hoka y Salomon They quickly filled the space in store windows that Nike had left without much product.

Meanwhile, product development had slowed as the company faced pandemic crises and leaned on the urban sneakers it already sold.

Executives have said they are restarting the product portfolio with a three-year plan that began before the Paris Olympics this year. Nike spent aggressively during the Games in an effort to revive sales through bolder advertising to a global audience.

With information from Bloomberg