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Nike drops guidance ahead of CEO change

Nike, facing one of its roughest patches in decades, moved to reset Wall Street’s expectations ahead of incoming chief executive Elliott Hill’s arrival.
The sportswear company withdrew its full-year sales guidance on Tuesday, citing the leadership transition later this month. Nike is also postponing its investor day, which had been scheduled for November, giving Hill more time to develop his turnaround strategy.
Investors are looking for Hill to rebuild Nike’s frayed relationships with retailers while retaining and inspiring staff who’ve lost faith in the company’s trajectory. Crucially, he’ll also need to accelerate development of new products.
Withdrawing the forecast “provides Elliott with the flexibility to reconnect with our employees and teams, evaluate the current strategies and business trends and develop our plans to best position the business,” chief financial officer Matt Friend said on a conference call with analysts.
Sales in the fiscal first quarter fell 10 per cent to $11.59 billion, just short of the average analyst estimate. Declines were especially sharp in North America and the region including Europe, Africa and the Middle East, while problems also persisted at the Converse brand.
Nike expects revenue to fall 8 per cent to 10 per cent in the second quarter before trends improve later this year.
The shares fell 5.4 per cent in late New York trading. The stock has dropped 18 per cent this year through Tuesday’s close, compared with a 20 per cent gain for the S&P 500 Index.
Pressures are easing in some areas: Sales in Greater China outpaced analyst expectations, and the 4 per cent drop there was the smallest among the company’s regions. Nike said new products are selling well in China, including the Pegasus 41 running shoe, as well as classic franchises like Jordan.
Gross margin benefited from lower costs for products, warehousing and logistics. Earnings per share in the quarter, which ended August 31, also surpassed expectations.
“While there are some early wins, we have yet to turn the corner,” Friend said. Outgoing CEO John Donahoe wasn’t on the call.
The numbers likely won’t matter much to investors, who say the first quarter is a bit of a throwaway as they await the new CEO’s strategy.
“The idea here is that everyone understands that Nike stock now will be predicated on what Elliott does in the future, and that isn’t something that can be really addressed,” said Simeon Siegel, an analyst at BMO Capital Markets. “This is a picture of a reality we already know has been changed.”
Hill, a Nike veteran who started as an intern decades ago, is coming out of retirement to take the top job on October 14. He replaces Donahoe, who became CEO in 2020 when sales were soaring, but oversaw Nike during one of the most tumultuous years in the company’s half-century history.
Donahoe had sought to boost sales in Nike stores and on its website by significantly paring the number of sneakers the company shipped to retail partners. But demand for its lifestyle sneakers slumped last year, while upstart brands such as On, Hoka and Salomon quickly filled the shelf space in stores that Nike had vacated.
Meanwhile, at Nike headquarters in Beaverton, Oregon, product development had slowed as the company dealt with pandemic crises and leaned on its existing lifestyle shoes. Executives have said they’re resetting the product pipeline with a three-year blitz that started ahead of the Olympic Games in Paris this year.
Nike spent aggressively around the Olympics in an effort to revive sales via bolder advertising for a global audience. The company said “demand creation” expenses rose 15 per cent to $1.2 billion for the quarter.
Nike is struggling to manage three major footwear franchises that catapulted the company to $50 billion in sales, then abruptly stalled. Sales of Nike Dunks, Air Force 1s and Jordan 1s – Nike’s top lifestyle lines meant to be worn on the street and not as performance shoes – dropped in the double digits last quarter, and the category is expected to decline through the year.
Friend said the company is intentionally reducing the proportion of the business that comes from those lines in order to “create better balance,” while renewing its focus on performance sneakers and apparel. He called out soccer, fitness and running as growth areas.
Nike has been particularly criticised for failing to prioritise runners, one of its key markets.
“We’ve acknowledged that we’ve lost market share in the running speciality channel,” Friend said. To emphasise the segment’s importance, he added that “Nike’s a running company, Nike’s a running brand, and it’s incredibly important for Nike to win with runners.”
Nike executives have hosted their retail partners and shown them products set for release in the second half of 2025 in a bid to win back their confidence. Nike is also investing in its partners’ shops, developing new areas within Foot Locker and Dick’s Sporting Goods stores.
With two more weeks to wait until Hill’s arrival and Donahoe absent from the call, Friend was the only Nike executive to address investors and analysts, with what sounded like a rousing halftime speech by an interim coach.
In between sober reminders of the challenges Nike faces on all sides, he pitched them on new store openings in Mexico City, a WNBA All-Star party and a one-on-one basketball tournament in Paris.
“Every obstacle, every setback was an opportunity to learn, to adjust, and to improve,” Friend said. “This is the foundational mindset at Nike, inspired by athletes and competition. And today is no different.” – Bloomberg

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