Understand
What has gone wrong at Nike and how the sportswear giant is trying to recover
Overview
Nike has experienced a difficult few years, marked by falling sales, a 75% drop in stock market value over five years, and the loss of its place in the S&P 100 index. Analysts attribute the decline to strategic errors made under former boss John Donahoe, such as pivoting away from traditional retailers to direct-to-consumer online sales, over-saturating limited-edition lines, and cutting back on product innovation. The company is currently executing a turnaround plan under veteran boss Elliott Hill, though recovery has been further tested by the departure of key sporting talents like Kylian Mbappé to rival brands.
Key points
- Nike's share price has tumbled by 75% over five years, wiping out hundreds of billions of dollars in market value and resulting in its ejection from the S&P 100 index.
- Former CEO John Donahoe focused heavily on a direct-to-consumer digital sales pivot and reduced spending on product innovation, which critics say damaged the brand.
- Strategic missteps allowed newer footwear competitors such as On and Hoka to capture market share and shelf space.
- Nike recently lost football star Kylian Mbappé, who ended his 20-year association with the brand to join Swiss rival On.
- Company veteran Elliott Hill has returned from retirement to lead a turnaround strategy named 'Sport Offense' to restore growth and profitability.
- Nike expects revenues to decline by high-single digits in the upcoming financial year and plans to achieve $2.5bn in savings by 2031, which will include job losses.