Nike’s next CEO, Elliott Hill, could learn a lot from Adidas’ CEO, Bjorn Gulden. In developing a strategic blueprint, Hill should follow Gulden’s lead in making Nike more nimble and introducing some great products.
But he also needs to draw on Gruden’s book in other ways. Next year’s sales and profit forecasts should be reset lower to be more realistic and reflect the fact that a turnaround will not be quick and easy. Nike giant.
Nike laid the groundwork by withdrawing its annual guidance through the end of May 2025, opting instead to set expectations on a quarterly basis.
This comes after first-quarter sales fell 10% to $11.6 billion. Nike expects a further 8% to 10% decline in the second quarter as it intentionally reduces supply of styles such as the Nike Dunk, Air Force 1, and Air Jordan 1, which saw demand decline after initial popularity. It is. Gross profit margin is expected to decrease by 1.5 percentage points. We expect the trend to gradually improve in the second half of this year.
The company also postponed its investor day scheduled for next month.
Changing priorities
When Gruden joined Adidas in January 2023, he found the company in crisis. Adidas ended its lucrative nearly 10-year partnership with rapper Ye, leaving him with a closet full of old Yeezy sneakers. As a result, Adidas could incur operating losses of up to 700 million euros in 2023, much worse than expected, he warned. This was a blow to investors, but the problem was resolved and Mr. Gulden was able to successfully turn around the company.
Of course, Nike hasn’t faced the kind of backlash that engulfed Adidas after Ye’s anti-Semitic comments.
However, there are many challenges ahead, including a lack of hot new shoes and competition from startups such as On Holding and Deckers Outdoor’s Hoka. Taste has shifted from Nike’s high-margin, chunky basketball styles to the low-fitting, retro styles that Adidas specializes in.
find his feet
Mr. Hill, a veteran of the company, should be able to build bridges with retailers. This is necessary for Nike, which has prioritized its own website and stores. But he doesn’t come from a product development background.
The hope is that he will inspire Nike’s designers and sneaker developers to bring more hit shoes to market. Nevertheless, it may take up to a year for new models to arrive in stores.
Mr. Gruden managed the Yeezy inventory better than expected and was able to reinvigorate Adidas. But the main impetus was to increase production after realizing that the company’s so-called terrace style, centered around samba, was finding favor with fashionistas. He’s currently referencing other styles from Adidas’ archives, such as the Superstar and low-rise retro models, and has postponed new releases. This has allowed Gruden to consistently exceed expectations. In July, he revised his full-year operating profit forecast upward to 1 billion euros.
If Hill follows the same strategy and cleans out his Nike closet full of out-of-fashion Dunks and Jordans, he’s sure to outperform.
