A boomerang boss at Nike may just do it

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Pop quiz: What do Starbucks, Walt Disney and Under Armour have in common?

Answer: They are all US consumer brands that have brought back top executives to run the company. Nike joined the trend last week when it said Elliott Hill, a retired company veteran, was returning to become its new chief executive.

Hill will replace John Donahoe, a former Bain management consultant whose four-year tenure has left the sneaker giant facing its worst sales slowdown in decades. Nike is in need of someone who can bring some excitement both to a demoralised workforce and the brand. Hill, a beloved company figure who started out as an intern, is well placed to lead Nike’s turnaround.

It is easy to see why boards are tempted to bring back tried and tested executives. The late Steve Jobs famously returned to Apple in 1997 after leaving in 1985, going on to introduce products such as the iPhone and iPad.

But rehiring bosses isn’t always a winning strategy. Disney’s shares are down 40 per cent since November 2022, when the company announced Bob Iger was returning to the company for a second stint as CEO. Then there is Howard Schultz, who held the top job at Starbucks three times. His last chosen successor Laxman Narasimhan got the boot after just over a year on the job. 

Companies led by boomerang chief executives performed “significantly worse” than peers, found a 2020 MIT Sloan paper. The study of comeback US bosses between 1992 and 2017 suggested an annual stock performance 10 per cent lower than their first-time counterparts.

Still, Hill may be just what Nike needs. Under Donahoe, the footwear giant went too far in cutting relationships with major retailers in a bid to sell more directly to consumers. It also relied too much on the retro sneaker trend for growth — pumping out endless reiterations of Air Jordans and Air Force 1, while investment and innovation took a back seat. That allowed upstart brands like Hoka and On to grab market share.

The stock is down more than 55 per cent from its 2021 peak. Analysts expect revenue for fiscal 2025 to fall 5 per cent, its biggest annual decline since 1999.

The return of Hill provides a much needed reset. But recapturing past magic will not happen overnight. Repairing retail relations is the easier task on hand. Regaining its “cool factor” means coming out with new products that will get sneakerheads and athletes excited again. Nike investors should prepare for a marathon, not a sprint.

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