Nike is charting a new course to reverse a period of slowing growth and intense competition that has seen its market value nearly halve since its pandemic-era peak. Nearly a year into his role, CEO Elliott Hill is spearheading a strategic overhaul focused on innovation, a renewed emphasis on sport, and rebuilding relationships with crucial wholesale partners.
The sportswear giant, which last year experienced its worst trading day in history, is now moving away from a direct-to-consumer model that analysts say inadvertently created opportunities for rivals like On Running and Hoka to gain significant market share.
Key Takeaways
- Nike is implementing a new strategy under CEO Elliott Hill to combat slowing growth and a significant drop in its stock valuation.
- The company is reorganizing its structure around individual sports categories instead of broad consumer segments like men's and women's.
- A key part of the plan involves reversing a previous strategy to prioritize direct sales and instead rebuild partnerships with wholesalers like Foot Locker.
- The shift comes after competitors Hoka and On Running captured market share by filling the retail shelf space Nike vacated.
A Return to Core Principles
At Nike's headquarters in Beaverton, Oregon, CEO Elliott Hill is clear about his vision for the company's future. The three-decade Nike veteran, who returned from retirement to take the helm, is focusing on what he calls the company's two fundamental identities.
"My first day on the job, my slide said two things: we’re a sport company, and we’re a growth company," Hill stated. "When we grow sport, we grow the overall marketplace. And when that happens, I like our chances of growing."
To put this vision into practice, Hill has initiated a significant internal restructuring. The company will now be organized around specific sports, such as running, basketball, and soccer, rather than its traditional divisions of men's, women's, and kids' products. This move is designed to bring a sharper, more authentic focus to each athletic discipline and directly challenge the specialized brands that have been eroding Nike's dominance.
The Challenge of a Shifting Market
Nike's stock is currently trading at less than half of its peak valuation during the pandemic. The company's struggles were highlighted last year when it suffered its worst trading day on record, erasing approximately $28 billion in market value in a single session. This decline reflects investor concern over slowing sales and the rise of agile competitors.
Correcting a Strategic Misstep
A central part of Nike's comeback plan involves unwinding a strategy implemented by former CEO John Donahoe. Under his leadership, Nike aggressively pursued a direct-to-consumer (DTC) model, prioritizing sales through its own website and retail stores over its long-standing relationships with wholesale partners like Foot Locker and Dick’s Sporting Goods.
While this approach initially boosted direct sales, its momentum began to stall as global economies reopened post-pandemic in 2021. More importantly, it created a vacuum on the shelves of major retailers.
An Opening for Rivals
Industry analysts point to this withdrawal from wholesale as a critical error. Stacey Widlitz, president of SW Retail Advisors, explained the consequences of the move. "That was a mistake," she said. "When you pull back from that channel and withhold some of your best and newest product, someone else comes in and fills those shelves."
This is precisely what happened. Fast-growing brands like On Running and Hoka seized the opportunity, securing prominent placement in stores and capturing the attention of consumers. Nike is now faced with the difficult task of winning back that retail real estate.
Nike's previous strategy of limiting wholesale distribution is now seen as a key factor that allowed competitors like On Running and Hoka to establish a strong retail presence and gain significant market share in the performance footwear category.
The Road Ahead for Nike
CEO Elliott Hill acknowledges the challenge posed by this new competitive landscape. "We opened shelf space, and now we’re having to earn it back," he commented. Despite the difficult road ahead, he expressed confidence in his team's ability to adapt. "Our teams are excited to pivot to a new offense."
While Hill has not yet detailed specific product innovations, the company's renewed focus on sport suggests a pipeline of new performance-oriented footwear and apparel is forthcoming. The success of this turnaround will depend on Nike's ability to deliver compelling new products that resonate with both athletes and casual consumers.
Beyond product innovation and rebuilding wholesale channels, Nike faces other significant hurdles. The company must manage and clear out excess inventory that has accumulated due to softer demand. It also needs to navigate substantial financial pressures, including offsetting an estimated $1.5 billion in costs related to tariffs. The coming months will be a critical test of whether this new, sport-focused strategy can put the iconic brand back on a path to growth and market leadership.