New Nike CEO Hill has the right skill set for the job: Analyst

There has been a big C-suite shake-up at Nike (NKE). CEO John Donahoe is retiring. He will be replaced by former Nike executive Elliott Hill, effective October 14.

Bernstein senior analyst Aneesha Sherman likes the move, saying it's good news for the stock, citing two reasons: Hill will be the new CEO and the announcement's timing. She notes that Hill has a long history at Nike, especially with the product, and appears to be well-liked at the company. "This is not only the right skill set in terms of understanding product and understanding Nike. I think he will be the right leader in terms of communication and vision because he's already very well known and liked within the organization," Sherman tells Yahoo Finance.

As for timing, Sherman points to the fact that Hill will be in place in time for the company's investor day on November 19, giving him the opportunity to share his vision for the company rather than the outgoing CEO's.

When it comes to Hill's priorities, Sherman thinks he will need to set up what his vision for the company is and then do more work to get the company's "mojo" back.

Watch the video above to hear who Sherman says has benefited from Nike's troubles.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Stephanie Mikulich.

Video transcript

Nike.

Ceo John Donahoe is stepping down, replaced by Elliott Hill.

Nike veteran Elliott Hill will become president and CEO effective October 14th.

Here with more is Bernstein senior analyst, Anisha Sherman, Anisha.

It is good to see you so big news.

After hours, Elliott Hill is in John Donahoe is out investors at least initially here celebrating the stocks of about 10%.

But you know the company backwards and forwards, Anisha, what do you make of this news?

I think this is very good news for the stock.

Both the, both the executive named as well as the timing.

Elliott Hill has worked at Nike for 32 years.

He's a product guy, he's ran retail in em in us in North America.

He knows the company and the product very well.

And from what we've heard at Nike, amongst former employees that we've spoken with, he's also very like at Nike.

So this is not only the right skill set in terms of understanding product and understanding Nike, I think he will be the right leader in terms of communication and vision because he's already very well known and liked within the organization and the timing is great too because Nike is having an Investor day in exactly two months on November 19th.

And you know, they're, they've promised talking about medium term targets.

It doesn't make a whole lot of sense for an outgoing CEO to talk about medium term targets.

So you need the new leader in place before you can have that conversation.

So the timing works very well.

Also, Anisha, you sound very positive.

It's Julie here.

It's good to see.

You sound very positive on Nike.

Uh uh but the stock is down 25% year to date.

And III I understand you want to look forward in the idea of this new CEO, but I do wanna spend at least a be talking about John Donahoe.

How much damage did he do at Nike?

So a lot of the blame has been placed on Donahoe himself and his lack of a product background.

And I think that did contribute, you know, it, it helps to have a CEO with a brand and product background who can make calls that need to be made, who can identify where there are red flags because they have the experience to do that.

And the outgoing CEO did not.

But part of the problem also was not his specific experience, but the fact that the company focus moved away from product, move towards tech and digital and other things.

And so they lost talent in product and they didn't spot some of the red flags and product.

They cut out a lot of the feedback loops and products.

So it was an organizational shift, not necessarily the background of one individual, but the organization's culture shifted away from product and that's something that needs to be fixed.

So Anisha, uh you know, Elliott Hill now coming in, what are his priorities, Anisha.

So I think the first priority will be to set a path forward.

And so the Investor Day is coming at the, at a good time.

He needs to set the path forward for the next five years.

Set some targets, give investors a sense of where this company is headed and what kind of numbers to expect, what kind of algo to expect for growth and earnings growth and that will set the course of of investor expectations and probably stabilize the stock a little bit and then he needs to do more work.

I mean, this is not a slow, this is this is a tanker that needs to be moved and it takes time.

Um But I think investors will give him a pass.

If the targets sound reasonable, the goals sound reasonable and will give him a pass for the next six months to a year to fix the ship before it starts working again.

Anisha what needs to be the goal in terms of product?

So Nike has somewhat lost its mojo in the market.

Um You know, it it made several different mistakes.

One was just the product process got so convoluted and delayed with a couple of different reorganizations changing the way product reviews are done to the point where even small incremental editions take a year to get out to market.

So we need some more nimbleness, we need some more speed and reaction to the market.

And then the second piece is we just need to, they just need to control scarcity in the market.

They over distributed several of the hot products to the point where they lost their brand heat.

So they need to regain that scarcity and demand pull, you know, as, as you know, Nike made these missteps um lost its mojo as you say, who gained um from those missteps.

Um What happened at the same time is there were a couple of emerging brands on and Hoka in particular that took over the shelf space that Nike gave up, that gained a lot of the consumers that, that didn't like what they saw from Nike anymore.

So they gained a lot of the market share and then more Adidas, which has been on a similar journey of its own with a new CEO and a turnaround has, has had a great year so far.

So they've gained some on the lifestyle side where their Samba and Gazelle shoes are sort of the issue of the summer this year and Nike's Jordans and Dunks aren't anymore and I know that you've got an outperform rating on Nike.

Um your price targets 109.

Is that especially with this management change?

Is that your top pick here in footwear or would you look at some of those competitors?

I think Nike is not an immediate pick.

I mean, the CEO catalyst was on the horizon.

You know, we, we knew it was coming at some point before the Investor day.

We expected that it would be at the September 20 the October 1st um quarterly results.

We didn't expect it to be sooner than that, but that isn't a catalyst that the market was expecting.

It is very good for the stock.

The November Investor Day will be another catalyst.

But beyond that, we just need to see this turnaround play out.

So it's gonna be a little bit of a slower burn beyond that.

I think elsewhere in the market, you can probably find faster recovery stories um for more beaten down names.

But I do like Nike.

I think I, I like it over the next six months and I like it on a longer term horizon.

Aisha big news after hours.

Thank you so much for helping us think through it.

Appreciate it.