Nike (NYSE: NKE) has been struggling for years, and the company finally faced the music on a needed overhaul, announcing last month that CEO John Donahoe would be leaving the company.
Donahoe took the CEO position in 2020, having previously served as CEO of ServiceNow, the enterprise cloud software giant. Donahoe brought a tech-first mentality, emphasizing data-driven priorities like digital sales and performance marketing, but a lack of attention to product, brand-building, and wholesale relationships led to some of the slowest growth in the company's history. In fact, Nike sales declined by double digits in its fiscal first quarter, showing how far the vaunted sportswear brand has fallen.
Nike tapped longtime company veteran Elliott Hill to serve as its next CEO, and Hill will step into the corner office on Oct. 14. Hill came out of retirement to take the position, having worked at Nike for more than three decades, much of that time in executive positions like president of consumer and marketplace, where he led commercial and marketing operations globally for the Nike and Jordan brands.
According to reports, Nike's rank and file audibly cheered the news when it was announced, a reflection of both frustration with Donahoe and affection for Hill. Modern Retail characterized the response to the news from former employees -- who are more easily able to speak with the press than current employees -- as "almost universally positive."
Hill will have his work cut out for him as he takes the reins of the struggling company. Here's a good bet on his first big move.
Image source: Getty Images.
A return to brand marketing
One of the biggest mistakes Nike made under Donahoe was overlooking brand marketing. Nike has long been renowned for iconic marketing campaigns around stars like Michael Jordan, Spike Lee, Tiger Woods, and Colin Kaepernick, not to mention the "Just Do It" slogan, but more recently, it seems to have forgotten about that legacy.
Instead of supporting broad brand-marketing campaigns like the ones you would typically see on TV or a billboard, Nike has focused on performance marketing, or the kind of ads you see on Google Search and social media that are targeted to users. That strategy can work, but it's a poor fit for Nike, whose biggest advantage is arguably its brand, especially when it's competing with fast-growing upstart brands like Hoka and On Holding.
Hill is likely to make plenty of internal changes as he returns to lead Nike, including a reorganization, but a good start to reignite customer affinity for the brand would be a splashy brand marketing campaign. Nike has an unmatched stable of top sports icons like Michael Jordan, LeBron James, Serena Williams, and Caitlin Clark, and that global star power can help reignite demand for the brand.
Under Hill, Nike will have to make up for lost ground in product innovation as well; brand marketing seems like the easiest mistake to correct and a good first step toward putting the brand on the right track.
Hill's experience with marketing and his history with the company suggests that rebuilding the brand will be a key focus of the new CEO.
Is Nike a buy?
It's encouraging that Nike employees are happy with the move to make Hill CEO and that he has a strong reputation within the company.
However, Nike has a lot of work to do to recover lost ground. Revenue fell 10% in the first quarter of fiscal 2025 (ended Aug. 31), and earnings per share were down 26%. It will likely take years for the company to return to full strength, but bringing in Hill as its next CEO is a good start.
At this point, it's too early in Nike's expected comeback to call the stock a buy. The stock isn't as cheap as you might expect, considering its recent performance, as it trades at a price-to-earnings ratio of 23.5.
Nike certainly has upside potential, but the company will first have to return to growth. It's worth keeping the stock on your watch list as Hill steps into the hot seat, but investors deserve to see a clear turnaround strategy before buying the stock.
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Jeremy Bowman has positions in Nike. The Motley Fool has positions in and recommends Nike and ServiceNow. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy.
