Nike turnaround is taking longer than CEO Elliott Hill expected: Analyst

Nike stock (NKE) is moving lower in Tuesday's extended-hours trading after reporting mixed results for the sportswear brand's fiscal fourth quarter: while earnings topped estimates, revenue declined 1.1% year-over-year.

Morningstar senior equity analyst David Swartz discusses what he was expecting from the earnings release and how Nike's performance is lining up with CEO Elliott Hill's turnaround strategy.

Video Transcript

00:00 Speaker A

You look at CEO Elliot Hill. You know, what do you make of the moves he's made, David? Has he made the right strategic moves? And what more does he need to say and do, David, to just convince investors, you know what, this is a smart investment?

00:15 David

The turnaround that Nike is currently working on is definitely taking longer than expected. It's taking longer than Elliot Hill expected. He came in now almost two years ago, I think it was October 2024. And, you know, at first, I think he was very optimistic about how quickly things could get better and and since then he's realized that the market has changed. Uh, he was away from Nike for four years, and this sportswear industry has gotten much more competitive in that time and there's some very strong competitors out there that are really uh, at times, uh surpassing Nike.

00:54 David

And so, it's it's been a long road, especially in in certain parts of the world like in greater China where the sales are continuing to decline rapidly and the profitability in greater China has completely collapsed. And that was at one time one of Nike's uh biggest profit centers. So, you know, there's a lot of problems and it's taking longer than expected. There have been a lot of management changes. Uh just recently we found out that Matt Friend, the the CFO since 2020 is going to be leaving. He's going to be replaced uh by the CFO from Pfizer.

01:32 David

And uh, you know, that's one of many management changes that are happening under Elliot Hill. At this point, really, we probably would have hoped that there wouldn't be any more management changes, but you know, the fact is that things are are going slowly. I do think though that things are in the right direction. The company has focused on new products especially starting, I think in the spring season of next year, so spring of 2027, and trying to increase its connection with global sports, which is Nike's greatest advantage as the most visible sports brand in the world. And Elliot Hill is trying to uh leverage that into getting Nike back to a growth profile that it normally has.

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