September 28, 2024

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Good morning. Even amid conference realignment mania [[link removed]] and NIL assurances gone wrong [[link removed]], WNBA Playoff ratings watch [[link removed]] and Chiefs dominance [[link removed]], I’m still thinking about Nike ejecting its embattled former CEO [[link removed]] last week. The new chief is beloved internally, but he’s got a turnaround job on his hands, and things often have to get worse before they get better. I’ve watched sportswear brands rise and fall since 2010, and Nike is hardly too big to fail. Lace up your running shoes and read on.

— Dan Roberts [[link removed]], FOS EIC

Lessons From the Ouster of Nike CEO John Donahoe

Kirby Lee/Imagn Images

On June 27, Nike stock closed the day at $94.19 per share. Then the company reported its fiscal fourth-quarter earnings, including a surprise (the bad kind): the long-dominant Oregon apparel giant cut its full-year guidance and warned it expects a 10% sales drop in its first quarter. When the market opened on June 28, the stock price had tanked 18% to $77.13.

It was Nike stock’s worst day ever, and CEO John Donahoe, who took the job in 2020, did not survive the drop. (A Bloomberg story [[link removed]] on Sept. 13 that called Donahoe the “man who made Nike uncool” and reported he “pissed off partners and disappointed fans” didn’t help.) On Sept. 19, the company parted ways with Donahoe and announced Elliott Hill [[link removed]], a popular company veteran, will take the CEO reins.

The stock has rebounded 10% since then. Employees at the Beaverton HQ have rejoiced [[link removed]]. Some of the LinkedIn posts from Nike watchers are downright euphoric. Veteran sneaker analyst Matt Powell wrote [[link removed]] that Sept. 19 “will go down as one of the greatest days in Nike history” and that Hill will take Nike “out of the dark days.”

But Hill has a lot of work to do to validate those cheers.

First, on Oct. 1 we’ll get Nike earnings [[link removed]] and find out if its July through September quarter was indeed as bad as warnings indicated. That won’t be on Hill’s shoulders, and optimism about his appointment might soften the blow anyway—that and the fact that shareholders are bracing for impact. Then Hill’s work will begin.

What was wrong at Nike, and how much of it can really be blamed on one leader? These are the broad strokes [[link removed]]:

Too much emphasis on its direct-to-consumer business (no wonder, Donahoe is the former CEO of eBay) to the detriment of Nike’s relationships with brick-and-mortar retailers (crucial in sneakerland). Too much discounting on its own web site, which dilutes the brand. A lack of innovation (ain’t that always the line when long-dominant brands dip? Look at Adidas) and a range of failed initiatives, combined with a three-year-long cost-cutting effort that included laying off 1,500 people [[link removed]]. The brand has lost that elusive “cool factor” to rapidly rising upstarts like On, Hoka, and even non-upstarts like New Balance, Asics, and Brooks that all understand running is the leading style segment now. (The WSJ [[link removed]] pinpointed in June the rise of the social running club, and how Nike blew its pole position with amateur runners.)

These problems won’t magically dissipate just because Hill is now The Guy. He can put new systems in place to fix many of them, but his bigger task is more intangible: refresh the brand. By the way, its latest campaign, “Winning Isn’t For Everyone,” was not well received [[link removed]].

Nike Isn’t the Only Brand in Need of a Refresh

Over in Baltimore, Under Armour founder Kevin Plank has been trying to refresh his brand for years, as the one-time fearsome challenger to Nike and Adidas is on a long decline. Under Armour’s latest earnings report, from its fiscal first quarter, showed just about every metric down [[link removed]], including apparel sales, footwear sales, and even profit, but the numbers weren’t as bad as analysts expected, and the company revised its guidance higher, so the stock gained.

Plank, a former Maryland football player, created a brand in 1996 that was extremely defined—arguably too defined. Its iconic product was a sweat-wicking shirt for lifting weights and playing football. Its motto was “Protect this house.” Its image was of tough, muscled men. The company has been trying to get away from that for a decade. But it has proven extremely difficult to get consumers to see Under Armour in a different light.

Amid its own specific struggles and broader industry headwinds, Plank put himself back in the CEO role [[link removed]] in March, replacing CEO Stephanie Linnartz, who had announced a three-year plan to fix the company, but was given less than one year. The signal: Only our founder himself can revive the brand.

In a way, Nike is sending the same signal: that a company insider with the trust and love of the staff (Hill) will succeed where an outsider (Donahoe) couldn’t. But brand is a squishy, elusive thing. Adidas went all-in on Kanye West [[link removed]] in 2015 to halt its long sneaker market share decline, and that move worked—until it blew up [[link removed]].

Making an apparel brand cool again takes a very long time, and requires changes at every level of the business, at every venue where the brand shows up to consumers. The swoosh has a long-established lead in the sportswear race, but challengers are rounding the turn and eyeing the podium.

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Good Week / Bad Week WNBA Viewership Surges, A’s Owner Under Fire

Mark Smith/Imagn Images

Good week for:

WNBA⬆ The league’s first round brought record-setting viewership, driven by the series between Caitlin Clark’s Indiana Fever and Connecticut Sun. Game 1 averaged 1.8 million viewers on ABC, despite competing against the NFL’s Sunday Week 3 slate, while the second game drew 2.5 million viewers on ESPN, a record number for a WNBA game on cable television. The other three series may have not performed as well as the Fever–Sun series, but the second game of each series drew more viewers than the average 2024 WNBA Finals game, including 1.2 million for the Minnesota Lynx and Phoenix Mercury on Wednesday.

Chiefs ⬆ The quest for a third straight Super Bowl is off to a strong start as Kansas City is 3–0 despite star tight end Travis Kelce averaging just 23 receiving yards per game. But Kelce’s connection to pop superstar Taylor Swift has helped the franchise overtake the Cowboys as the NFL’s most-watched team, as the Chiefs have appeared in three of the five highest-viewed telecasts in 2024. [[link removed]] Patrick Mahomes, Harrison Butker, and Kelce are also high on the NFLPA’s list for sales of player-branded merchandise [[link removed]].

Bad week for:

John Fisher ⬇ The Athletics played their final series at the Oakland–Alameda Coliseum this week. The team is set to play the next three years in Sacramento before moving to Las Vegas in 2028. On Thursday, nearly 47,000 fans flocked to the Coliseum [[link removed]] to bid the team goodbye, but the focus was on the A’s much-maligned owner as many put up signs that said “SELL” while chants of “sell the team” echoed throughout their home finale. Fisher wrote an open letter [[link removed]] to fans Monday apologizing for not completing a stadium deal to keep the team in Oakland.

Conference Traditionalists ⬇ The old structure of college football changed well before this week—but any semblance of the past may have been flushed down the drain completely after this week’s chaos. The Pac-12, which announced two weeks ago four schools from the Mountain West are set to transfer to its conference [[link removed]], needs two more schools to maintain its FBS status. This has ignited realignment buzz across college football and has left several conferences in limbo [[link removed]].

You Might Have Missed Exclusive on Trevor Reilly, Conference Realignment Drama

Imagn Images/FOS

In August, FOS reported that Trevor Reilly, who resigned as a special teams coordinator on Deion Sanders’ staff that month, found himself in the Middle East last year seeking NIL (name, image, and likeness) money for Colorado football players. In an FOS exclusive this week, Reilly told contributor Jill Painter in Hawai’i that he funded the trip himself [[link removed]]. Why? Painter and FOS reporte r A.J. Perez [[link removed]] got the interview.

The conference realignment bonanza continues. Talks are heated, lawsuits are flying, and conferences are scrambling to form retention plans. The Mountain West and Pac-12 are particularly at odds. FOS reporters have been covering the chaos minute by minute. [[link removed]] Caitlin Clark’s run in the WNBA postseason lasted just two games. But as FOS’s Colin Salao [[link removed]]and David Rumsey [[link removed]] report, her presence in the league this year was a gift that kept on giving [[link removed]]: Higher attendance, viewership, and merch sales. When action in the W resumes next year, we’ll see if the Clark effect continues—but there’s also a new crop of rookies who could potentially carry over the growth of NCAA women’s basketball to the pro level. Advertise [[link removed]] Awards [[link removed]] Learning [[link removed]] Video [[link removed]] Podcast [[link removed]] Written by Daniel Roberts [[link removed]], Colin Salao [[link removed]], Meredith Turits [[link removed]] Edited by Lisa Scherzer [[link removed]], Or Moyal [[link removed]], Meredith Turits [[link removed]]

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