To The Moon

After a challenging tenure marked by market share losses and strategic missteps, CEO John Donahoe is stepping down, making way for company veteran Elliott Hill to take the helm on Oct. 14.

The announcement sent Nike's stock soaring, reflecting investor relief after years of disappointment. Nike's stock has shed 16% in the past two years, compared with the S&P 500's nearly 50% gain. The shares were up about 7% to $85.65 in afternoon trading.

THE GOOD

Donahoe joined Nike in 2020 from tech giant eBay. He was brought on to help spur Nike's technological growth — something he successfully did. Under his tenure, the company focused on growing direct-to-consumer, or DTC, sales through the app and other digital channels. When the pandemic hit, that strategy really paid off. Nike's direct sales jumped 60% between 2019 and 2022.

THE BAD

But in the process of growing the DTC business, Nike cut ties with longtime bricks-and-mortar partners, such as Foot Locker and Macy's. So when the economy started to reopen and consumers flocked back to stores, shelves previously populated by Nike were now occupied by other brands, including upstarts such as On Holding and Deckers Outdoor's Hoka brand. It wasn't long before Nike was bleeding market share, with no concrete strategy on how to patch up the wound.

THE UGLY

A broader slowdown in the athletic-wear industry compounded the problem, as growth rates normalized from the gangbusters pace the industry notched during the pandemic years. China's economic woes didn't help either, stalling growth in one of the company's biggest markets.

Nike has tried to do damage control, including reforging some of the severed wholesale ties and spending on marketing initiatives. Yet the results have yet to bear fruit. The company's recent quarterly and full-year guidance both fell short of expectations — adding to investors' discontent with Nike's management and strategy.

Just don't feel too bad for Donahoe. In his four years as CEO, he racked up just over $100 million in total realized pay, according to data from executive compensation firm Equilar. And his retirement package includes $187,500 per month for 18 months, adding up to just over $3.3 million, according to Equilar estimates.

NEW CEO

Elliott Hill is a longtime Nike veteran who joined the company in 1988 as an intern, and remained with the company for more than 30 years before retiring in 2020. He has held senior leadership positions across Europe and North America, and was the president of consumer and marketplace before his retirement. In that role, he led all commercial and marketing operations for the Nike and Jordan brands.

Nike said Hill was responsible for helping the company's business grow to more than $39 billion through his tenure.

NEW DAWN

Investors seem very upbeat about the change. Shares of Nike jumped as much as 10% in after-hours trading Thursday when the news was announced.

"We view Hill as one of the best-case scenarios to lead Nike back to its former roots and culture of success," wrote Citi analyst Paul Lejuez in a note Friday.

Hill's appointment represents Nike's transition back to the "old guard," wrote Matthew Boss, an analyst at J.P. Morgan. Including Hill, three veterans from the company's management team from before 2020 have returned, Boss wrote, adding that the company also recently promoted two more executives with over 30 years of average tenure at Nike. The five senior execs worked closely with executive chairman and former CEO Mark Parker, he added.

NOT SO FAST

The one caveat analysts point to is it will take time for any changes Hill makes to take effect. Plus, after four years away, the new CEO faces the challenge of adapting to "significant changes in the market," notes Jefferies analyst Randal Konik. These include heightened competition, changes in distribution channels, as well as shifts in product innovation.

There are two coming potential catalysts for the stock: Nike's fiscal-first-quarter earnings, due Oct. 1, and its investor day scheduled for November. Hill's appointment won't have any impact on the quarter, which ended in August. Analysts aren't expecting blockbuster results — in a best-case scenario, the company will meet or slightly beat expectations, boosted by the Olympics halo effect. Worst case, the company's business deteriorated further, partially spurring the CEO transition.

Investors may give Nike a pass on a lackluster quarter given its executive shuffle. But that means the market will place a bigger emphasis on the company's investor day later this fall. It's possible Nike will reschedule the event to a later date to give Hill some time to draft a new strategy. But whenever the event comes to pass, it's certain to go a long way toward influencing investor sentiment.

"Until we have more clarity on the company's direction, we expect the stock to remain range-bound as the market awaits for concrete plans to drive growth," Konik wrote.

To long or to short?

⚠️ Trading tips: Although this is good news for NIKE and the chart shows a bullish wedge pattern, the market could also sell the news next week. Looking at puts under 85 back to 81 since it could be a knee jerk reaction. Just Do It 💪

🚨 Please click Like 👍, Comment 💬 & Repost 🔄 this article found at the bottom of your screen. Follow me for the latest news, trading ideas & strategies to ride the market daily with profits!

@CaptainTiger @Daily_Discussion @Andreana @AyKing @BillionaireN @jace0777 @koolgal @SPACE ROCKET @Terra Incognita