Over the past several months, talk of Nike chief executive John Donahoe being ousted from the role he’s held since 2020 has gone from whispered speculation to open discussion as pressure grows on the brand to draw a line under a historic slump.
Analysts at Bernstein wondered if a management change is “on the horizon” in an email to clients earlier this month. Stephanie Link, chief investment strategist at Hightower Advisors, said on CNBC, “I think for the stock to work, you do need some sort of management change to happen.”
Nike is hustling to shift sentiment around the brand. A successful Olympics saw the sportswear giant get its marketing back on track, hammering home its new “Winning Isn’t For Everyone” ethos as several Nike-sponsored teams and athletes won gold in Paris. And last week, Williams Trading analyst Sam Poser upgraded the company from “sell” to “buy,” citing catalysts such as the reaction of major retailers to Nike’s rehire of veteran Tom Peddie and efforts to reduce the distribution of oversaturated sneaker lines like the Air Force One.
But a growing number of investors and analysts say change needs to happen at the top for any turnaround to take effect. Executive shakeups are in the air. There has been a flurry of CEO swaps of late, with Starbucks, Victoria’s Secret and Estée Lauder all making surprise moves in recent weeks. Analysts are now joining in the public debate on Donahoe’s tenure at Nike, spurred on by hints that the sportswear giant, whose stock is down 21 percent since January, could be the next target for activist investors.
Nike has generated some positive momentum lately by publicly acknowledging and beginning to address some of its shortcomings. (Its shares have surged 14 percent in the past month.) But what remains to be seen is whether the narrative around Nike can shift quickly enough to reassure investors and the company itself that Donahoe is the right leader. He retains the backing of Nike, and the chances of activist investors pressuring the brand into removing him are slim thanks to the control co-founder Phil Knight has over the board and the company voting stock.
But Nike is at the very outset of a long-term transformation that won’t be accomplished overnight, and the longer it takes to yield results, the greater the pressure on Donahoe will grow.
“A change at the top would certainly help morale on campus and send a very clear signal to the stock market and to the industry that changes are coming,” said sportswear industry analyst Matt Powell.
What’s fueling the talk of management change at Nike?
Earlier this month, Pershing Square Capital, which is run by prominent activist investor Bill Ackman, disclosed ownership of three million Class B Nike shares worth $299 million. The move fuelled speculation from analysts that Nike could be targeted by activist investors pushing for a change in management.
Calls for Donahoe’s removal have gathered pace as Nike’s struggles have mounted. In June it 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.
Critics have laid the blame squarely on Nike management under Donahoe, citing missteps such as a lack of product innovation, too much reliance on retro sneakers, uninspired marketing and an overly radical pivot to direct-to-consumer sales (though some issues hampering the brand, such as the DTC shift, began before he took the job). For years Nike showed little urgency in addressing the issues.
“Usually when a new CEO comes in you start to feel the effects of their work within the year,” said Jessica Ramirez, senior research analyst at Jane Hali and Associates. “Donahoe was hired four years ago, and we haven’t seen the brand evolve in that time at all.”
How likely is executive change at Nike in the short term?
Donahoe appears to have the all-important backing of Phil Knight, who publicly declared his “unwavering confidence and full support” of the CEO in June.
While Knight stepped down from Nike’s board in 2016, he still controls the company through his entity Swoosh LLC, which owns 77.5 percent of Nike’s Class A shares. Knight himself owns an additional eight percent, according to Nike’s notice of annual meeting filed in July. A further 11.7 percent of Class A shares are owned by his son, Travis Knight, meaning the family controls over 97 percent of the company’s primary voting stock.
Holders of the Class B Stock have the right to elect only 25 percent of the Nike board, according to the filing, so Knight is in a position to effectively assemble a board loyal to him. That board currently includes his son Travis, as well as executive chairman and former chief executive Mark Parker, a close ally of Knight’s and a Nike veteran of 45 years.
The most an activist investor could do would be “to come in and stir up the pot, getting into the press and making it uncomfortable for the board,” Powell said. “Ultimately, the way the business is structured, nothing will happen if Phil Knight doesn’t want it to happen.”
That said, circumstances can change quickly. Starbucks’ former CEO had the company’s support, too, until he didn’t.
Who could succeed John Donahoe?
Analysts have speculated that potential candidates for Donahoe’s eventual replacement could include recently retired Deckers CEO Dave Powers or Foot Locker boss Mary Dillon, who already works closely with Nike.
Though one key grievance surrounding Donahoe’s leadership has been the fact that — unlike his predecessor Parker, who began as a Nike footwear designer in the 1970s — he was both an outsider to Nike and had no experience in product. The only other outsider to lead the company was William Perez, who was appointed CEO in late 2004 and resigned in January 2006 after disagreements with Knight. Experts expect that Nike would seek to address one or both of these points should they hire a replacement in the future.
Bernstein said a possible internal candidate — like Heidi O’Neil — could be an option, though might be less favourably viewed by investors “given the clear need to shake things up at Nike.”
“It’s always better if the candidate comes from a product background,” Ramirez said, pointing to the role Adidas CEO Bjørn Gulden has been able to play in the brand’s quicker-than-expected turnaround following his hire in January 2023.
Powell pointed out that changing leadership won’t magically solve Nike’s problems, which are likely to take several quarters to resolve.
Until Nike decides otherwise, Donahoe remains the person trusted to lead the brand’s turnaround. The clock is ticking.
