Nike’s new CEO is good news, but the CFO will need to help turn things around

Good morning. Nike held its first-quarter 2025 earnings call on Tuesday – without the participation of outgoing CEO John Donahoe and new CEO Elliott Hill. But the sneaker giant’s chief financial officer, Matthew Friend, happened to be on the phone, explaining Nike’s latest difficult quarter and its plans to prevent the situation from deteriorating further during the transition.

For the three months ended Aug. 31, Nike’s revenue fell 10% year-over-year to $11.6 billion. Nike Direct sales dropped 13%. Additionally, it saw a 20% decline in digital revenues and an 8% decline in wholesale revenues. But Nike stores were up 1%.

The company is taking “aggressive” action to transform its product portfolio, create a better balance in its business and reignite its brand dynamics through sports, explained Friend, CFO since 2020 and has been with the company for more than 15 years. “That said, a comeback on this scale takes time; and although we have some early wins, we are not yet around the corner,” he added.

Nike shares fell about 5% Wednesday morning after the company withdrew its full-year guidance and postponed its investor day indefinitely during Tuesday’s earnings call, Fortune reported.

Return winds

As Nike announced on September 19, four years after leaving the sneaker giant, Hill returns on October 14 as president and CEO. While working for the company for 32 years, he held managerial positions, including: president of its retail and marketplace business units and leading commercial and marketing operations for the Nike and Jordan brands.

The obstacles Friend and Hill face in turning the company around include increased competition, loss of shelf space with some partners, lack of new products and difficult economic conditions, David Swartz, senior equity analyst at Morningstar Research, told me Services .

“Nike has become less competitive in the running shoe market recently because it has withdrawn its products from too many stores,” Swartz said. However, he explained that the company’s competitors were ahead of the curve by offering high-quality products that sold well. In an attempt to raise prices, Nike limited the supply of certain shoe models.

“There is a gap in Nike’s offering as the company develops new products while reducing production,” Swartz said. Nike cannot solve this problem in the short term, especially as demand in China, North America and Europe remains low, he added.

Another issue is the popularity of “terrace” style shoes. “Nike makes these types of shoes, but Adidas is bigger in this category,” he added.

‘Back to the good old days‘

Donahoe, CEO since 2020, will become a full-time non-executive employee of the company until his retirement on January 31. Under his leadership, Nike lowered its revenue forecast for December 2023 for the first time in history, Fortune– Phil Wahba reports. In June, the company again lowered its revenue forecast, leading to the largest-ever drop in share values ​​and a $24 billion decline in market capitalization.

In taking over as CEO, Hill worked closely with Friend and many other Nike executives, some of whom had recently returned or received promotions, Swartz said.

“This is Nike’s way back to the good old days when Mark Parker was CEO,” he said. Hill is well-liked by employees and management and is very knowledgeable about many aspects of Nike’s business, Swartz explained. By contrast, Donahoe, a seasoned technology executive and consultant, was an outsider to both Nike and, for the most part, the industry, he said.

Donahoe underestimated “the importance of partners like Macy’s, DSW and Foot Locker in running shoe sales,” Wahba writes. Cost cutting turned out to be his favorite tactic, which only made Nike’s problems worse.

During the earnings call, Friend thanked Donahoe for his contributions to the company, such as navigating through the pandemic and supply chain disruptions and accelerating digital transformation.

Meanwhile, Friend said Hill “leads with a passion that inspires the best of the team.”

“It’s safe to say that collaboration between the CEO and CFO should improve under Hill,” Swartz said.

As CFO, Friend sees Nike’s challenges as opportunities. “Adversity creates greater focus, which leads to innovation and new growth,” he said during the earnings call.

Sheryl Estrada
[email protected]

The following CFO Daily sections were curated by Greg McKenna

This story was originally published on Fortune.com