The world's top sports brand Nike is floundering in a prolonged slump that has persisted for several years. Ultimately, it implemented drastic measures, replacing its executive team to address declining performance.
According to Bloomberg on 6th (local time), Nike abruptly dismissed Heidi O'Neill, president of the consumer, products, and institutional sector, who had been with the company for 26 years.
At the same time, Amy Montaine was promoted to brand president, and Phil McCartney joined as chief innovation, design, and product officer, leading a major overhaul of the executive team.
John Donahoe, Nike's chief executive officer, said, "We will lead Nike's next growth phase with a new leadership team."
Nike's performance issues have escalated into a crisis. The revenue for the third quarter of the fiscal year (December 2024 to January 2025) announced in February shrank by 9% compared to the same period last year, recording $11.3 billion (approximately 15.5 trillion won). During the same period, net profit dropped by 32%, and earnings per share fell by 29%.
Nike has experienced a decline not only in North America and Europe, which are key markets, but also in China, where it once saw explosive growth, following the pandemic.
The direct-to-consumer (D2C) strategy that the former executives ambitiously pursued during the pandemic ended in failure.
At that time, Nike's management, observing that travel restrictions were in place in major consumer countries such as the United States, Europe, and China, judged that consumers found it difficult to visit department stores or retail outlets directly, and they suspended contracts with major retailers.
Nike also terminated its contract with Amazon, the largest online shopping mall in the U.S., and expanded its own online shopping site. The intention was to reduce distribution costs, save on commissions, and directly acquire consumer data. As a result of this strategy, the share of Nike's overall revenue from partners plummeted from 85% to 58% by 2022.
However, this strategy inadvertently provided opportunities for competitors such as Adidas and New Balance to expand further into retail. During the same period, emerging brands like On Running and Hoka One One filled the void left by Nike.
Nike products, which have become increasingly hard to find in major online and offline stores, have gradually distanced themselves from consumers. This has led analysts to argue that the recent struggles, particularly in the fashion-sensitive footwear sector, stem from the failure of the D2C strategy.
Business Insider analyzed, "Nike dominated the sports industry with innovative designs and marketing from the 1990s to the early 2010s, but over the past five years, it has become complacent, resting on its past glories without noticeable innovation."
Internally, Nike also faced strategic confusion. In the process of simplifying product categories to 'Namsung, women, and kids,' expertise in core sports such as running and basketball was diluted.
The Wall Street Journal pointed out, "One of the main causes of the crisis is that Nike shifted too quickly to become a lifestyle brand instead of focusing on core sports values."
While Nike was struggling, competitors swiftly exploited the gap. Adidas captured the younger consumer demographic by focusing on retro sneakers like Samba and Gazelle. As a result, it saw a 6% growth in sales last year.
Puma has gained prominence in emerging markets by lowering prices with sustainability campaigns and localized strategies. Reebok successfully drew attention from women sports fans by signing an exclusive contract with WNBA star player Angel Reese.
Matt Cohen, an analyst at NPD Group, a sports equipment market analysis firm, said, "For Nike to reclaim its former glory, product innovation is essential, and it must strengthen connections with core consumers who have strong brand loyalty." He added, "Brand recovery is crucial beyond temporary executive changes; restoring consumer trust is key."