How Nike’s New CEO Plans To Turn Things Around

Key Concepts

• Nike's Turnaround Mission: The core objective of the video is to detail Nike's strategy to regain its market position and financial performance after facing significant challenges.
• Elliot Hill's Leadership: The return of longtime executive Elliot Hill as CEO is central to Nike's turnaround efforts.
• "Going Back to Sport": A key strategic pillar emphasizing a renewed focus on athletes and sports at the core of Nike's identity and product development.
• Direct-to-Consumer (DTC) Strategy: Nike's past overreliance on DTC channels and the subsequent need to rebalance with wholesale partnerships.
• Innovation and Product Pipeline: The importance of scientific research and development, exemplified by the Sports Research Lab, in creating new and improved products.
• Brand Reorganization by Sport: A structural change to align Nike, Jordan, and Converse brands with specific sports segments (e.g., Nike Running, Nike Basketball).
• Inventory Management: The challenge of clearing excess inventory and the strategic importance of making room for new, innovative products.
• Macroeconomic Headwinds: External factors like tariffs impacting Nike's operations and profitability.
• China Market Strategy: Nike's approach to regaining market share in China, including re-evaluating store concepts and product focus.
• Long-Term Growth Algorithm: The goal of returning to mid-to-high single-digit revenue growth and teen margins.

Nike's Mission to Regain Stride

Nike, the world's largest sportswear company, is currently undergoing a significant turnaround effort. This initiative is being led by Elliot Hill, a veteran Nike executive who came out of retirement to assume the role of CEO approximately a year ago. The company has faced considerable challenges in recent years, including a historic trading day where it lost $28 billion in market capitalization. Despite these efforts, Nike's stock remains less than half of its peak value during the pandemic. Hill acknowledges that this turnaround is a "marathon, not a sprint," a sentiment reflected in recent quarterly earnings results.

Vision for the Path Forward

In an exclusive interview at Nike's headquarters in Beaverton, Oregon, Elliot Hill outlined his vision for the company's future. This vision encompasses strategies for combating competition and driving innovation within its product pipeline. CNBC also gained a behind-the-scenes look at Nike's Sports Research Lab, a critical hub for product development.

Hill emphasized the importance of understanding athletes at a fundamental level: "We need to understand our athletes and how they fit into a population. Are you endurance? Are you explosive? Are you high arch? Low arch?"

The primary question from Wall Street, as Hill notes, is whether Nike can return to its historical performance metrics: "Are you going to get back to the old days where it was mid to high single digit revenue growth, teen margins?" Hill confirmed this as the long-term goal, stating, "Absolutely. And the teams are excited about pivoting to this new offense. And it's going to take time for us to get the offense accelerated not only here from a creation perspective, but in the other 190 countries in which we do business."

Challenges and Competition

Nike has encountered several challenges in recent years, including:

• Pulling Back from Stores: A strategic decision that impacted its retail presence.
• Overreliance on Direct-to-Consumer (DTC): An excessive focus on its own channels, potentially alienating other retail partners.
• Focus on Classic Styles: A perceived lack of innovation, which has allowed competitors like On Running and Hoka to gain market share.

Hill acknowledged the intensified competition: "Has the competition gotten tougher since the last time you were here in trying to do that? Oh no question. The competition is strong today." He further explained that a contributing factor was Nike's decision to "open up shelf space and opened to buy in the wholesale business, and so we're having to earn that back."

The "Going Back to Sport" Strategy

A cornerstone of Elliot Hill's turnaround plan is a renewed and intensified focus on sports. Hill stated on his first day, "We're a sport company and we're a growth company, we're going back to sport. We're going to put the athlete back at the center of everything that we do."

Nike's Sports Research Lab

Located on Nike's 400-acre campus, the Sports Research Lab is where scientists meticulously study athlete movement. This research provides crucial insights for developing new products. The lab is equipped with advanced technology to capture comprehensive data: "Everything in here, this entire space, is designed to let us capture data on you no matter where you go. So we have over 400 motion capture cameras, we have over 96 force plates."

Repositioning Internal Teams

A significant internal restructuring is underway to place sport at the forefront of all operations. Hill explained this shift: "What does that mean? That you're going to put sport at the forefront of everything we do? Because people think of Nike, that that's how it's always been. So what are you doing differently there?"

The company has reorganized its three core brands—Nike, Jordan, and Converse—by sport. This means dedicated teams for segments like "Nike running, Nike basketball, Nike training, etcetera." The rationale behind this is that "the consumers in each of those segments and the competition in each of those segments is different."

An example of a performance assessment drill used in the lab is the "lane agility drill," which is employed in the NBA and WNBA to characterize athlete performance and also serves as a robust test for footwear.

Lessons from Past Strategy Shifts

Elliot Hill's return to Nike followed a period of significant strategic shifts under former CEO John Donahoe, which included a strong emphasis on DTC channels and a reduction in wholesale partnerships. This strategy, while initially successful during the pandemic due to supply constraints and increased demand, ultimately proved detrimental.

As Hill explained, "I think when Covid hit, supply got constrained, demand goes up. And I think the team did what I think anybody would do. You shift product over to digital commerce and all of a sudden that takes off double revenue, double margin. And it's a winning strategy. And then of course everything normalized. Physical retail started to open back up and we continued on with that strategy. And so continue to invest in Nike direct digital commerce. And I think over time, it ended up hurting the brand because there's a certain set of consumers that want to shop choice."

The consequence of this overemphasis on DTC was a loss of connection with consumers who prefer physical retail: "I think the biggest obstacle, and certainly when you go to stores and you talk to the people who work at technical running stores, that consumer has gone elsewhere. And it's really hard when a consumer falls out of love with a technical brand and falls in love with a new one to get them back."

Hill, who initially retired in 2020 after 32 years with Nike, was brought back as President and CEO in 2024. He was motivated to return after discussions with key figures like Tim Cook, Mark Parker, and Phil Knight.

Operational Hurdles and Strategic Adjustments

Inventory Management

One of the immediate challenges Hill faced upon returning was addressing excess inventory. This is a critical metric for investors. Nike is actively working to clear out older, underperforming styles to make space for new products. Hill indicated that this process would likely take "a quarter or two still to go," but expressed confidence in the team's efforts. The goal is to introduce "newness and freshness" that not only benefits retailers by allowing them to make more money but also inspires consumers. This also aims to support "higher average selling price."

Macroeconomic Headwinds and Tariffs

Nike is also navigating external economic pressures, including tariffs. The company faces a significant tariff bill, estimated at "$1.5 billion." While Nike cannot fully absorb these costs, it leverages its "expansive and diverse global supply chain" built over 50 years. The strategy involves working with factory and retail partners to "absorb some of those headwinds." Regarding passing costs to consumers, Hill stated that Nike's "pricing architecture" is adjusted "every single quarter," a practice that predates the current tariff situation.

The China Market

Nike's comeback is significantly dependent on its performance in China. In the first quarter of 2026, Nike's China sales declined by over 9% year-over-year, reaching $1.5 billion. Hill acknowledged that China's performance was slower than anticipated.

Despite the current challenges, Nike views China as a long-term opportunity due to the growing embrace of sports like running, fitness, and basketball by its 1.4 billion consumers. A key difference in the China market is the prevalence of "monobrand store[s]," which are exclusively Nike. Nike had previously shifted too far towards "sportswear oriented and not sport enough." Consequently, the company is "reevaluating the concepts that we have in China," which involves a rollout across its 5,000 stores and will "take time."

While Nike has diversified its manufacturing portfolio, reducing its reliance on any single country, China remains a significant manufacturing location.

The Path to Execution

Hill's biggest challenge is managing his own impatience, as he needs to "keep telling myself to be patient." However, he expresses high confidence in the strategic moves made and the organization's readiness. The teams are "motivated, they're inspired, they're ready to go." The focus now is on "execute."

Conclusion

Nike is embarking on a comprehensive turnaround strategy under CEO Elliot Hill, centered on a renewed commitment to "going back to sport" and placing the athlete at the core of its operations. This involves significant structural changes, a focus on innovation driven by scientific research, and a rebalancing of its retail strategy to include wholesale partners. While facing challenges from intense competition, excess inventory, and macroeconomic headwinds like tariffs, Nike is strategically addressing these issues, particularly in the crucial China market. The company's long-term goal is to return to its historical growth and margin targets, driven by a motivated and aligned organization ready for execution.