Analysis-Nike’s struggles test investor confidence in CEO Hill’s turnaround effort

When Nike brought retired executive Elliott Hill back in October 2024, investors had faith that he would quickly turn the struggling company around. However, two years later, Nike's market value and earnings have more than halved, while the very issues Hill was hired to fix persist. These setbacks were reinforced on Thursday when Nike announced additional layoffs and warned of steeper-than-expected declines in sales and profit for the upcoming fiscal year ending in May 2028.

Analysts believe the challenges are likely to worsen before they improve, highlighting the need for a clear roadmap to restore growth and profitability.

Nike's struggles are being tested as investors await the November investor day to see if Hill's strategy will deliver the desired results. The company's turnaround efforts have primarily focused on restoring relationships with retailers, refocusing product development on sports, and simplifying operations. Yet, revenue continues to decline across both wholesale and direct channels.

Nike acknowledged that bailing out problems faster than creating new ones is crucial, but current efforts to address the brand issues causing the decline are insufficient.

The challenges are particularly evident in China, a once-significant growth engine for Nike, which has become a problem area. Hill admitted that stabilizing the market in China will take multiple seasons and will impact profitability. Meanwhile, the Jordan brand is another area where progress is slow, with Nike attempting to transition it back to premium growth by reducing retro sneaker launches and increasing innovation and creativity in the lifestyle space.

Despite these efforts, Greg Zakowicz, an e-commerce and retail advisor, believes Nike's plan may be more challenging than initially anticipated.