Nike is on track to close a price gap after nearly three months triggered by a stock discount following the company's 1Q24 results and a downgrade of the company's earnings forecast for the upcoming fiscal year. Today the company's stock price is up more than 7%.
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Open account Try demo Download mobile app Download mobile appNike's stock price is up more than 7%, reaching its highest level since the 1Q24 earnings report. Source: xStation
The impetus for the company's surge in today's session is the news of a change of CEO. After four years, John Donahoe, during whose tenure Nike reached the highest levels of market capitalization, but also lost more than 54% from its peaks, is resigning from his post.
The decision to change the CEO seemed much needed for the company. With increasing competition and Nike's weakening position in the market, as well as the company's increasingly apparent lack of product innovation, investors' concerns began to materialize in the company's stock price. From the beginning of the year to the August low, Nike has lost more than -34%, and even after today's price jump, the stock is still trading at nearly 20% down from the beginning of 2024.
The choice of Elliott Hill, on the one hand, may seem surprising due to the new CEO's lack of “media savvy,” having made virtually no appearances in the public space. From the company's perspective, however, the choice seems strongly justified, as Elliot Hill is a true veteran among Nike employees. He spent 32 years at the company before leaving in 2020. During that time he worked in managerial positions in both the North American and European divisions. According to media reports, he was one of the anticipated candidates to take over the role of Nike's CEO as early as 2020, before the role was given to John Donahoe.
Elliott Hill's return is being read as a move toward Nike's return to its previous habits, traditions and strategies. Over the past four years, Nike has heavily changed its strategy, and while this seemed like a good move at first, over time, the subsequent “improvements” have led to a deteriorating bottom line for the company.
The reaction in Nike shares is not the first spike in the stock price after the news of the CEO change. The last time such a strong move was seen in Starbucks shares was in mid-August, when the company's stock shot up 22% after news that Brian Niccol (Chipotle's former CEO) had taken over the new role. Since then, Starbucks has gained more than 6% more.
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