Nike CEO John Donahoe to Step Down

Nike’s announcement Thursday that it would replace chief executive John Donahoe wasn’t a complete surprise. In recent weeks, calls for the company to find fresh leadership had grown louder, with analysts openly suggesting a change at the top was needed, and speculation swirling about an activist push for new management after Pershing Square Capital, run by activist investor Bill Ackman, disclosed it had bought a stake.

What was surprising was the company’s choice for Donahoe’s replacement.

Elliott Hill, who had retired from the company in 2020 after a 32-year career, will become Nike’s new CEO on October 14.

Investors greeted the news positively, sending Nike’s shares up more than 10 percent at one point in after-hours trading.

“Change is welcome at Nike,” RBC Capital Markets analyst Piral Dadhania wrote in a note to clients.

Hill, who when he left Nike headed commercial and marketing operations for Nike and Jordan Brand, was not among the options analysts and insiders typically discussed as possible candidates for Donahoe’s successor. Those names included former CEO and executive chairman Mark Parker, or Heidi O’Neill, Nike’s current president of consumer, product and brand. External candidates like Foot Locker boss Mary Dillon or recently retired Deckers CEO Dave Powers were also tossed into the mix.

But Hill’s appointment didn’t come totally out of the blue, either; as an executive who had held myriad roles within the company over three decades, he was floated as a potential successor to Parker in the late 2010s.

“The positives are that Hill understands the sportswear market with decades of experience, and further understands Nike’s history and culture,” Dadhania wrote.

Simeon Siegel, an analyst at BMO Capital Markets, pointed out in a note that Hill is also “known — and — liked internally and with retail partners, potentially driving an immediate morale boost.”

Still, Nike’s decision to bring Hill out of retirement instead of choosing someone within the company currently raises questions “around the depth of the bench,” as Dadhania put it.

Nike will have the opportunity to answer those questions at its upcoming Capital Markets Day in November, which is when investors tend to expect big announcements. Hill will have little time to prepare his strategy, but the pressure on Nike to act had apparently grown too great.

“It became clear now was the time to make a leadership change, and Elliott is the right person. I look forward to seeing Nike and Elliott’s future successes,” Donahoe, who will also resign from Nike’s board but will stay on as an advisor until the end of January, said in a written statement Thursday.

Donahoe became Nike’s top executive in January 2020, succeeding longtime CEO Parker, and adeptly steered the brand through the Covid-19 pandemic. But a wave of departures from long-tenured executives followed while scores of other senior decision-makers were affected by multiple rounds of layoffs in the years since.

Frustrations with his leadership grew as Nike was criticised for a lack of product innovation, an over-reliance on retro sneakers and an acceleration of Nike’s pivot away from wholesale, which saw it lose customers and create opportunities for competitors. His status as a relative outsider to the brand and his non-product background — he was formerly CEO of Bain and eBay — became a growing point of contention for insiders and investors alike.

In recent months, Nike had begun to address some of the core issues critics said were hampering the brand, but by that point sales were on course to fall to a low not seen by Nike in decades. In June, Nike projected a mid-single-digit percentage decline for the year through May 2025, after reporting just 1 percent growth in its most recent fiscal year. If that forecast bears out, it will be the company’s worst performance in 26 years.

Hill, who began as a Nike intern in 1988, brings with him a wealth of Nike institutional knowledge, having held several regional and global management positions at the company up until his retirement.

His appointment is the latest move of a wider initiative to restore Nike veterans across the company’s management. Nicole Hubbard Graham, who left the brand in 2021 after 17 years, returned as chief marketing officer in January this year — a move that has already yielded a distinct tone shift in the brand’s messaging. Tom Peddie, who retired in 2020, recently returned as vice president of marketplace partners to rebuild relationships with retailers.

Nike’s hope is that Hill will be able to turn the company around, though experts predict it will take some time for Nike to reverse its slump. Before Thursday’s news, the company’s stock was down 23 percent since the start of the year.

“Given our needs for the future, the past performance of the business, and after conducting a thoughtful succession process, the Board concluded it was clear Elliott’s global expertise, leadership style, and deep understanding of our industry and partners, paired with his passion for sport, our brands, products, consumers, athletes, and employees, make him the right person to lead Nike’s next stage of growth,” said Parker in a written statement.