Nike: 3 things the new CEO must do to revive the brand

Well, today is the first day for Nike's new CEO, Elliot Hill, as he looks to turn around the struggling sneaker company and look no further than the stock price for those struggles. Yahoo Finance's Brian Sazzi here with us now, looking at what Hill needs to do to revive the brand. Hey, Brian. Hey, what's up, guys? So I think to understand what Nike has to do here, before we even get into what Elliot Hill, a longtime Nike veteran, has to do to save this ship, you have to understand the mood around Nike's stock price. And if you go to Yahoo Finance, hit up Nike's ticker page, hit the Stats button. You'll see some of the things that I'm going to bring up on the screen right here. All in all, you have Nike stock still trading on multiples as if it's crushing it. Nike is not crushing it. Nike has been doing horribly for two years. So to see some of these metrics is just absolutely mind blowing. I don't know what investors are thinking. Nonetheless, 4P ratio Nike, 30 times forward earnings. For perspective here, the S&P 500 trades at about 21 times. So Nike is still valued at a premium for the broader market, despite it not earning that valuation in two years. And I continue that thread here. The trailing price to book ratio, 8.8 times, also at a premium to the market. The price to earnings growth ratio, 4.15 times. Good rule of thumb is usually one or under one is an attractive valuation on a company. Nike's trading at four times what would be otherwise seen as attractive. So overall, this is a market that's probably still not getting the deep fundamental problems at Nike that Hill has to fix. Now to turn the ship around, here are a couple things I think Hill needs to focus on. First, rebuild trust with wholesale partners. Prior CEO John Donahoe, he did a terrible job managing relationships with the likes of Foot Locker, department stores. And the company has struggled as a result. Elliot Hill needs to get some of the best products back into some of these wholesale partners like a Foot Locker. Number two, rebuild the management ranks and culture. By and large, we haven't seen a lot of changes, I would argue, in the C-suite at Nike over the past few years. It's time for Hill to absolutely clean house and get some real people in there to operate this business. And then lastly, number three, realize trends have changed. You know, we've seen a big push into streetwear styles. Saw that in the latest Piper Sandler teen survey. Nike products are falling a little bit out of favor and there's been this push to streetwear. Nike has historically not done well in the streetwear category, but the whole world is now wearing streetwear again. Nike needs to get with the program on that front. And now just a little fun thing I just wanted to chat about with Brad and Sean about. This is a new Nike golf sneaker here. Let me just see if we can toss that photo up there. That is the new Jordan golf sneaker. Now Brad, you and I played golf a couple times. I know you have some of the best golf sneakers that I've seen anybody ever wear. But I think this sneaker is very indicative of some of the problems at Nike. I think it's horrifically ugly. I mean, you're asking some- It's like a basketball shoe. It's really ugly. It is a basketball shoe. I mean, it's really ridiculous. And I think it says a lot on the product pipeline at Nike. It needs to be refreshed, they need some cool stuff. To spend over $2 for these sneakers that look absolutely dreadful. I mean, I think it says a lot about this company and why the stock, to me, still looks very pricey. Well, good thing is you won't have to spend $200 on them because they're on sale. Are they on sale? Yes, they actually are. And I checked them out over the summer. I did not hit the buy button. But what I do know- And that says a lot that you're not a buyer. Well, I haven't- That says a lot. Like you said, I have enough golf sneakers. So, but this is also kind of indicative of what they were and the prior CEO in John Donahoe, his strategy was look at Jordan brand, try to expand and really hop on the fanfare that that had been able to see, especially in the retro category and bringing that into other sports. I bought some Jordan football cleats and I haven't played football in, what, six, seven years at this point? In New York on a flag football basis. So, all of these things considered, I was one of those people. But for a long period of time now, you were looking at a vastly different consumer. The consumer back then was, okay, I've got discretionary dollars. I'm gonna spend them. I'm gonna get the Jordans. I'm gonna get, or try to get the Off-Whites or whatever dunks they're coming out with. And so, after you see some of that oversaturation and then a pullback in consumer spending in some of those discretionary dollars, that's gonna hit the business very head on and that's just what happened. Let me ask you guys this. Is the Jordan brand still relevant? If you think about it, now we grew up, our generation, we grew up wearing Jordans. We also grew up watching Michael Jordan. This generation, I mean, you're under 20. You have no idea who Michael Jordan, you've never seen him play. Do you still have that connection to the Jordan brand? You've seen his plays on YouTube. You don't have the same, a lot of young people who are watching sports right now, they know who their favorite athletes are because they can watch them just regularly. They see and track their performance and their stat lines are continuing to populate. Jordan's stat line is not populating. His bank account is continuing to populate because he's been able to put together a massive deal with Nike decades ago that really has challenged the test of time at this juncture, but that's great for him. And so now Nike and all of the other athletic apparel brands are looking for who their next big star is. And whether that's New Balance or whether that's Adidas, Adidas has been able to do that well with Anthony Edwards. And of course, Nike, they've had the contracts with LeBron James and so many athletes that are still playing right now. It's time to bring up the next generation. Yeah, I was gonna say, the Piper Sandler survey that you referenced goes to exactly that, right? Yes, it does resonate, I think, the Jordan brand clearly with millennials. Those are the people who are still buying them. It's not resonating with the younger generation, and that's really what Nike's new CEO needs to focus on. They're still wearing Crocs, they're out there wearing Uggs, like these are real things. That's where the product pipeline comes in, one of the focuses here from analysts, right? I'm wearing On, look at me, I've got On. These are new Roger Federer's. I just dropped about a hundred bucks on these things, they're pretty good, comfiest on. He's not buying right now, and you still bought it. A hundred bucks, that's insane. I mean, how do you, I mean, love Roger. There's more than that. Look at my swag, this guy's awesome, this guy's, I love Roger.