Nike Faces Headwinds: Leadership Change and Revenue Declines Loom Ahead of Earnings Report

As Nike prepares to report earnings for the first quarter of fiscal 2025 Tuesday (Oct. 1), the company faces significant hurdles marked by a leadership transition and shifting market dynamics. Elliott Hill will take over as CEO from John Donahoe  on Oct. 13, a move aimed at revitalizing the brand amid declining sales and heightened consumer expectations for innovation and a revamped digital transformation strategy.

Analysts project a 10% drop in revenue, forecasting total earnings to fall to approximately $11.65 billion from $12.94 billion year over year. This anticipated decline follows a June earnings report that highlighted a 2% decrease in revenue for the quarter ended May 31, with net income expected to plummet nearly 50% to $770.9 million. The dip in profitability is attributed to higher expenses linked to increased advertising during the recent Olympics and a focus on product development.

The leadership change comes as Nike grapples with challenges in its digital transformation strategy. Under Donahoe, the company faced criticism when its market capitalization dropped by $28 billion following disappointing earnings projections, which indicated a revenue decline of “mid-single digits” for fiscal 2025. This marked the worst day for Nike stock since its 1980 initial public offering (IPO), signaling urgent operational concerns.

Hill’s return to Nike is viewed as a strategic move to leverage his extensive experience, having previously contributed to the company’s growth to over $39 billion. Throughout the course of his career at Nike, Hill held senior leadership positions across Europe and North America. Before retiring in 2020, he was president, consumer and marketplace, leading all commercial and marketing operations for Nike and Jordan Brand, including the P&L across the company’s four geographies.

In an interview with PYMNTS, Neil Saunders, managing director, retail, at research firm GlobalData, said Hill faces several challenges.

“With a string of poor results, Nike has been under pressure for a while,” Saunders said. “The return of Elliott Hill, who has a long and successful pedigree at Nike, is a deliberate play to demonstrate that the company is trying to resolve its issues and get back to its roots. That includes better storytelling, far more product innovation and closer partnerships with important retailers. Essentially, this is trying to get Nike back onto the front foot in terms of the boldness and market leadership which have been absent for quite some time.”

Saunders added Nike needs to assess its digital strategy.

“Nike’s obsession with pushing direct to consumer, via digital, has been unhelpful,” he said. “While investment in this area is important, it should not have been pursued to the detriment of other channels. Nike is a big brand with a wide audience, some of that audience does not shop digitally and Nike needs to recognize that and cater for it.”

Sudip Mazumder, SVP, retail industry lead, North America at digital consultancy Publicis Sapient, told PYMNTS, “Shifting consumer preferences have led to a demand for specialized products that are tailored to specific activities such as running, hiking and weightlifting — areas where [athletic footwear brand] Hoka has excelled, particularly in specialized footwear. Additionally, Nike’s recent focus on fashion and lifestyle products may have diluted its emphasis on performance-driven athletic apparel and accessories. Ongoing supply chain disruptions have further impacted Nike’s ability to produce and distribute products efficiently, creating opportunities for competitors to gain market share. Rising materials, labor, and transportation costs have put additional pressure on Nike’s margins, making it more difficult to compete on price.”

There are several areas Nike can focus on for future growth, according to Mazumder, including expansion into untapped markets and diversifying product lines to include fitness equipment, accessories and lifestyle products.

“Nike’s new CEO, Elliott Hill, will focus on these strategic areas and address these challenges,” he said. “By doing so, Nike can regain its competitive edge and continue to uphold its leadership position in the athletic apparel industry.”

The post Nike Faces Headwinds: Leadership Change and Revenue Declines Loom Ahead of Earnings Report appeared first on PYMNTS.com.