By Juveria Tabassum and Aishwarya Venugopal
(Reuters) -Nike's new CEO is expected to double down on the company's efforts to repair relations with retailers to energize sales, reversing a strategy under outgoing chief John Donahoe that focused on selling directly through its stores and website.
The sportswear giant named company veteran Elliott Hill as its CEO on Thursday, instilling confidence among investors about a turnaround at the firm that has been struggling with strategy missteps and intense competition.
The company's shares, which have lost a quarter of their value this year, surged 6% in premarket trading on Friday.
" Nike (NYSE:NKE)'s board (including the controlling Knight family) wanted a leader with extensive company knowledge to address its recent problems, the most pressing of which is Donahoe's efforts to prioritize direct selling over product development and retail relationships," Morningstar analyst David Swartz said.
Former eBay (NASDAQ:EBAY) executive Donahoe, who took the helm at Nike in 2020, aimed to build out its e-commerce business and drive its direct-to-consumer (DTC) division.
That meant trying to sell more products through Nike's own stores, app and websites at full price and relying less on other retailers like Foot Locker (NYSE:FL) and Macy's (NYSE:M).
The strategy shift misfired, helping newer brands such as Roger Federer-backed On Holding and Deckers-owned Hoka snatch some shelve space and market share from Nike.
Earlier this year, Nike executives admitted that the DTC strategy was not driving growth as expected and that it was losing ground, especially in the running category.
"Donahoe was the right man for the job when he came in to shift the business model," said Art Hogan, chief market strategist at B. Riley Wealth.
"(But) the world changed post-pandemic to where consumers wanted to get out and see the brand on shelves and unfortunately, they shifted too hard in 2020 to make the shift back easy."
Nike is pinning its hopes on an Olympics year to help win back some market share by spotlighting performance products such as the Alphafly 3 racer and the Pegasus running shoe.
It is also planning to roll out new $100-and-under sneakers, to lure price-conscious shoppers.
A clearer picture of Hill's strategy will emerge at the company's investor day in November.
"While we do not expect Nike to back away completely from (its) push into direct-to-consumer, we very much look upon the appointment of Elliott Hill as CEO as a clear indication that Nike is re-focusing on product innovation," said Brian Nagel, an analyst at Oppenheimer.