Nike's New CEO Proposes Solution to Slump
"Improving Brand Image Through Inventory Management"
Q2 Performance Down 7.7% Year-on-Year
The new CEO of Nike, the world's largest sports brand, which has been mired in poor performance, cited the excessive discounting policy as the cause of the crisis and announced a shift to a premium strategy.
On the 19th (local time), foreign media reported that Elliott Hill, who took over as Nike's leader last October, presented his business strategy for the first time during the earnings call for the first performance announcement since his inauguration. CEO Hill prioritized rebuilding relationships with retailers and restraining discounts and promotions. Hill, who worked at Nike for 32 years, was appointed as the new head following John Donahoe, who was dismissed in September due to poor performance. At the time of the leadership change announcement, the stock price rose about 8% in after-hours trading, reflecting market enthusiasm, but experts say there are many challenges ahead for the new CEO.
On this day, CEO Hill pointed to "excessive promotions (discounts and sales)" as the cause of poor performance, explaining that "the level of price reductions not only affected our brand but also disrupted the overall market and the profits of our partners." He proposed improving inventory management to enhance the brand image as a solution. To this end, he also said they would avoid discounts. "Some of these measures will have a negative impact on short-term performance, but we have a long-term perspective," he said, adding, "Change will take time."
He also said he would focus on soccer, basketball, training, sports apparel sectors, and sports-related marketing. "We lost our obsession with sports," he emphasized, "Relying on the silhouettes of a few sportswear items is not who we are."
In the earnings announcement, Nike reported that net sales for the second quarter of the fiscal year (September to November) decreased by 7.7% year-on-year to $12.35 billion (approximately 17.9 trillion KRW). This was better than the market forecast of a 9.41% decline.
Beaten by Asics and Pushed Aside by Adidas
Recently, Nike has been going through a turbulent period. Under CEO Donahoe's leadership, Nike decided to sell products only through its own website and stores, not through specialized shoe retailers like Foot Locker, resulting in a significant loss of market share to competitors. According to StockX, the number one resale platform in the U.S., sales of Nike and Jordan series in the first half of this year decreased by 21% compared to the same period last year, while competitors Asics and Adidas increased by 600% and 90%, respectively.
Local media such as The Wall Street Journal (WSJ) pointed out, "Under Donahoe's leadership, Nike's annual sales increased by more than 31%, but this was the result of mass-producing existing franchise products like Air Force 1 and Air Jordan 1," adding, "The scarcity value of limited edition Jordan series has diminished, and the phenomenon of sold-out products is now a thing of the past."
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