Nike CEO Elliott Hill Talks Turnaround, Converse Brands

Bloomberg Audio Studios, podcasts, radio news. Welcome to our Bloomberg audiences worldwide. Romaine Bostik here in Milan, Italy with Elliott Hill, the CEO of Nike. Great to have you here, Elliott, it's great to be here.

Thanks so much for having me and this great city.

Well, thanks for inviting me. You didn't just invite me here to Italy. You invited me to actually oversee what has become a big relaunch here of your ACG brand here at the Milano Cortina Wonder Games.

Yes, yeah, it's been it's part of Clearly, we led with some innovation in the apparel and air Milano jacket, but we also use this as an opportunity to reintroduce, if you will, the ACG brand to the trail running consumer. And we thought there was no better place to do it than here in Milan, when the eyes of the world were watching, but also with the backdrop of the

Well, you've guys Nike, I should say, there's been masters at branding. You've been in the CEO chair now for sixteen months or so, you've been a Nike for much longer than that. I want to talk a little bit though, about how these types of launches, the innovation that you see, the buzz that it creates, how that actually translates into sales.

Yeah.

So I think a couple of things.

Number One, these moments, these sport moments are critically important to our brand and frankly to the industry.

Their tentpole moments.

Again, whether it's an Olympics and a Winter Olympics, a World Cup, a Super Bowl, NBAL Star Game, and frankly, they're really I think galvanizing moments for our teams internally to make certain.

We show up at our best and we.

Use those moments to take the relationships that we have with the world's greatest athletes and translate that into coveted, beautiful, innovative product.

There's only Nike.

Can do and so these are critical moments for our company and for our brands, and no question, they are the moments that can help create a halo over over the business.

Side of the of the of the sport as well.

When we talk about the evolution of nigietri Core. You are a road running company. Back the most recent quarter with the relaunch of the Romeo and the pegasust line twenty percent growth in your running business. There's another aspect of this though, that's been picking up a report that went viral a couple of years ago about the explosion of off road running trail running if you will, and ACG I would assume fits into that in some capacity.

Running, No question.

So when we and by the way, it's not just trail running, it's the overall outdoor industry, if you will, And there's no there's no question that consumers are there is a movement to getting outdoors, and whether it's in China or in Europe or the United States. And so we looked at the overall outdoor market and the opportunity that exists there and it is there is some crossover, but it is incremental opportunity from a branding and positioning

So we're going to see more products.

You will see, no question, you will see us continue to invest in the AGG brand. It's going to be around design, protection, attitude, innovation, and you'll see a six stand beyond Trail Running moving forward.

I'm curious though ACG has been around for a long time. It started out as a performance.

Brand stop of the Top of the Mountain.

Top of the Mountain, a bunch of K two climbers.

You've got some reason decided to do out a pair of Nike sneakers and they sent them back to Nike said, look, here's some feedback, here's how we can make this better. But ACG has been through some fits and starts, and I am curious as to why there hasn't been that continuity in the brand.

Was it the.

Marketing of it, Was it the innovation or lack thereof what?

No? I think.

I think with anything, it comes down to positioning. And I'm really excited about where the team's going to take this brand. We're calling it We're going for the wild Ones. So you think about the outdoor world with a little bit of an attitude and a swagger, with an element and an approach around design and innovation, and so again I'm excited for what the team has come up with and the positioning and the opportunity that lies in.

You signed a lot of athletes under the ACE the Nike ACD brand. Now you're sponsoring events in that space as well. There has been I guess some concern about this idea that a lot of what you see in the outdoor space, particularly when it comes to ultra marathons and a lot of the off road type of racing, that there's a certain counterculture to that. And how does Nike, which is probably one of the biggest sportswear companies in the world, a mainstream brand.

Are you at risk of maybe.

Alienating some of those folks who just kind of want to be on the fringe.

I think that's that is a risk if we just showed up as the big bag Nike. But I think this team, and if you were able to meet the team that we've put on this they live and breathe this space, so they understand it deeply. And we're trying to show up and without question in the most authentic way from an athlete perspective. And we've signed some as you've already pointed out, some of the greatest athletes, and how do we bring something new.

And different to the sport?

And I don't know if you saw what happened at Western States with Caleb shows up at the starting line. It's over one hundred degrees out and he's wearing, you know, the radical air long sleeve top. People are looking in like, are you crazy running in long sleeve?

But it's that.

But it's about performance and innovation that helped him obviously win the race and set the second fastest time. So we're going to come at it through the lens of innovation, design and an attitude that I think is new, fresh and Frankly, I believe and we believe the outdoor consumer is ready for So.

The Airflow shirt that Caleb was wearing got a lot of attention when you.

Look at the outdoor space.

So, I mean, there are a lot of names that already dominates your Ultra solemnon smart Wool, Patagonia. Is this strategy of going for that outdoor consumer. Is that actually playing offense or are you catching up to the rest of the folks.

I think we're always on the offense. We actually have a maxim that says on the offense always, and so the team's definitely approaching it from an offensive perspective and trying to make certain that you know that we're coming with something new, fresh perspective. And so far, the consumers responding extremely well to the product, and it's not just their parel conversation the same thing and.

The I don't know if you saw the Alpha Fly.

Shoe that we also launched with the full length carbon plate and something new and different to the sport.

I've seen a lot of these products, Alpha Fly, the hyper Ice, I'm forgetting a couple others.

The Nike mind.

All these things come out and I am curious these are new products, and they seem like risky products. And forgive me for saying this, but it seemed like for a while Nike wasn't taking as much risk. It was relying on you know, your classics, your dunks, you know, retro styles and such.

Are you giving your team a.

Little bit more of a leash to be able to sort of come up with these crazy ideas and try to make them into something.

I think innovation with the athlete in mind has been at the harder Nike from day one, and so as I've come in, I am nurturing the design and innovation teams, and we have one of the world's largest sports of research lab, if not the largest sports research lab in the world, in the Nike Sports Research.

That you were able to see that and how we.

Nurture those teams to dream and think and solve problems and then translate that into beautiful, coveted, innovative product that the consumer wants, needs and maybe sometimes it doesn't even know they need. That's what I'm trying to bring to this role, and too the team is to make sure they understand the importance of it and we nurture it.

But your return, you were a Nike for three decades. You left for about four years or so. At some point you got a call to come back and to actually be the CEO of this company.

Sixteen months roughly.

Now that you've been in that chair, you talk about that Nike Innovation Lab.

I remember somebody says something to me.

You could tell me if this is true and forgive my French, But there was some matra going around, some momo saying create epic.

Was that from you or was that from film McCartney?

Where did that come from? I don't know if I can take credit for it.

I know so where that came from is Phil and his leadership team Martin. Here today, we're sitting around thinking about the future and more importantly what we need to do at this moment in time and always here at Nike. And so yeah, I guess I can confirm that is true. That's one of the mantras coming out of that building. And uh and frankly, I love it. I love the irreverence of it. I like the attitude of it. I

Right, and that translates to the consumer.

The consumer Libe, Well, you touched on a Nike Mind that came out of the Nike Sports Research Lab. This idea of how do you use neuroscience and reflexology underfoot reflexology to get the athlete ready for their performance, that came out of the Sports Research Lab and it has now launched into the consumer and there's been a tremendous demand for it. It was selling I just only wish

You spend a lot of time meeting with your athletes, meeting with your designers as well. You also have to spend, as a CEO of a public company, a lot of time meeting with investors.

Have they bought into it yet?

I think there's no question. If you see where the stock we've held up over the sixteen months, the focus on sport, the focus on growth. They understand then the portfolio that we have three strong brands, Nike, Converse in Jordan. The focus on sport and how we're segmenting each of the brands by sport and then ultimately paying it off in one hundred and ninety countries around the world is only Nike can do with the size and scale.

That we are.

But when I talk to analysts on Wall Street, they're relatively complementary of what you've done, but they are still concerned about sales growth, which is still relatively flat. The concern about profitability, which to a certain extent is not quite there, or at least not to their liking.

When do you get there?

When do you get there to a sustainable growth rate on revenue and more importantly, generating more profits and wider marg Yes.

One of the things that we've talked a lot about is what is the top line growth rate with our investors and the bottom line expectations that we're confident that we'll be able to get there. We're confident that the sport offense is the path forward. Those three brands, a portfolio of brands, portfolio of sports, footwork, parel, accessories, and then again paying it off in the marketplace. And so

Which it was a strong result for US.

It's our largest reporting segment, are running back to double digit growth. And then of course our wholesale business, which is critically important to the future of our business to serve consumers wherever they choose to shop, also back to growth.

So running North America was up more than twenty percent. Overall in North America was up nine percent across the board. I want to talk about the wholesale Dell Yeah, in North America that did great. I think was roughly about twenty percent as well. But there's been some criticism that maybe the sell in that you've done is maybe too heavy into North America and not necessarily broad based across the globe.

The focus was across the entire globe in terms of the wholesale side of the business.

I think the team in.

North America, led by Tom Petty, who's seasoned veteran, He has the relationships.

He had to say.

No, that's pe d d ie for.

Correction, but he is tremendous understanding of the marketplace, the consumer, and he and his team have done a really nice job getting back and with the wholesale partners and driving that level of growth, and you'll start to see that across the rest of the world as well. Confident in the leaders that we have in place and the desire for our retail partners to serve their consumers. We have a joint consumer and they want access to our brands.

That relationship better with them.

I mean Nike gravitated away from those retail partners to a certain extent back in the early twenty twenties. I know they kind of tried to reset under Donaho before you then came in. When you talk about being able to sell to Amazon or Macis or whoever else here, they're.

Comfortable with what you're giving them selection wise prices.

Yeah, I think there's there's no question we're having to pull a lot of our products forward and to really drive that innovation and that newness and freshness. I think we have an opportunity around depth that we're still working through to make sure that we have the depth to drive the revenue and profits that they expect from us.

What's the balance now between what you're doing with the wholesale partners and what you're doing with your own Nike Digital, which you're seeing a lot of softness contraction, if you will. Is that just the natural transition as you try to sort of right size things or is there something else going on too?

No, no, So I think I talked a lot about

No?

in the five Actions, I talk about an elevated and integrated marketplace, and really what the team now has lined up on it's making certain that wherever a consumer chooses to shop for our brand, we show up in a thoughtful, meaningful way.

And what does that mean.

It's the consumer that shops that, whether it's digital, physical, owned a partner, making certain that we have the right assortment for that consumer and the right presentation, the right depth, and the right level of service around it to create the overall experience. And that's what we're driving right now, and that's where our focus is.

How closely do you work with those retailers? I mean, I saw you had last over the holiday in the US something with urban outfitters kind of a pop up there. Are you trying to be more integrated into what your displays look like in those YEA.

The elevation piece that I talk about is being proud of where our brand shows up wherever. That is again digital physical owner partner, And it's not just the assortment, it is the presentation of that assortment because at the point of sale, when the consumers interacting with our brand, it does it can't just be about the product. It has to be about the stories that we tell and the beauty of it. So there's no question that we're putting an emphasis on really elevating the premium nature.

Of our brands in terms of being able to preserve or that premium nature. I know you've pulled some inventory, yeah, but you're trying to right size that. How much further do you have to go to get inventory levels back to a situation that are going to not cost you any money or any additional money, but at the same time puts you on a better path with the r ZERU supply.

But you know, we touched on it last quarter.

We're feeling good about you know, we talk about the big three, the Air Force one, the AJA one and the Dunk Air Force one. Frankly is back to growth. So we feel good about the work that the teams are done. And more importantly than clean up, because I'm like you, I'm tired of talking about the I'm more about the innovation. What I'm most proud of is the growth that we're seeing and running trainings coming behind that.

You'll see it in football, global football or soccer. As we roll into on.

The conference call, that that soccer global football, if you will, was more probably further along than some of the other sports that you're involved.

Yeah, and again we talked about it earlier, those tempole moments. The World Cup is a tempole pole moment and so our cross functional team on that that comes to there, comes to work every single day and focuses on the game of football. That team hustled to make certain when we launch.

For the World Cup. From Football our Boots.

We have three really silos, three different types of play with innovation each of those silos.

And it gets to this idea too of also curation.

I mean, it's one thing to offer a wide variety of things, but in terms of in your retail channels, how much more curation are we going to see so that you know, people kind of can be able to zero in on exactly.

What they are.

Yeah, when you think about that marketplace that we talked about earlier, Yeah, I think there's no question that we have to be thoughtful about the specific consumers that shop in each of the stores or retail partners, and being thoughtful about the assortments, and we have to be much more curated so that we create the differentiation in the marketplace which allows each of our retail partners and ourselves to drive the revenue profits that we need.

And so there's no question.

We're going to be much more thoughtful and curated in the way we think about the marketplace.

And speaking of curation, I know North America is doing great. There's still a lot of concerns about the contraction we're seeing in China. Some of the criticism has been just the model. The business model in China overall, with their guards to apparel, is a little bit different. There was also this idea that Nike stores weren't as cur rated as what customers there wanted. When do we start to see a bit more improvement there? I know, you've got a new.

Head of Asia right now. Yeah, we do have a new head of Asia.

I'm excited about Kathy Sparks and what she brings to the market. So over twenty five years of experienced deep retail consumer, she understands our brands and our culture. So excited about what she and the team because it's going

You know, you have put a big focus on the athlete and refocus on sports, and it wasn't one of the first things you did when you got back. You kind of worked with them to kind of make sure that that licensing agreement got extended. I am curious. I mean, obviously American Football, if you will, I mean, how important is it to have those types of agreements with the major sporting agencies.

So yeah, My first just really quickly story, My first slide that I put up when I walked out on stage October fourteenth was We're a sport company and we're a growth company. And unbelievable applause in the room and so there was no question We're focused on sport and yes, the story is true. One of the first phone calls I made was to Roger Goodell, and we have a long standing relationship and we're excited about the extension that

You have a big focus on sports and the athlete.

You are still to a certain extent a lifestyle brand, fashion brand, if you will.

Whether you want it to be or not. What's the strategy with that.

I mean, you have the partnership with Nike Skims, obviously, you have your own internal design that is very fashion forward. Here, what's the balance between going after that customer who maybe just wants it for lifestyle and fashion and those who are looking for actual performance.

Yeah. I think the key is.

What separates us from any other fashion brand is sport is innovator, is design, is the athlete. And I think it's critically important that whatever we do and whenever and we do and we will go after the sportswear business, we do it through the lens of sport and the athlete and what the athlete wants needs not only on the pitch, field, coret track, but also how they want to show up from a lifestyle perspective off those you know,

Are you happy so far with the partnership with Skins.

Yeah, that's gone really well the launches.

I think the combination of our two brands and the understanding that we have around performance and innovation in terms of some of the materials, what they bring from a body shaping perspective, and then from a footwear perspective, what we bring to the table, and the consumers responded. We just launched last week here in Europe, so we've now moved into Europe with it and had a great launch both in Paris and London.

So really excited.

Do you anticipate doing additional partnerships or is this kind of a one off?

Oh?

I think in our world you always have to keep our eyes and ears open and our minds open to potential partnerships because I think the world in this collision of sport and culture is only going to accelerate, and it's our responsibility to make certain that we keep the aperture wide.

But you've been at the Nike has been at the nexus of that for years, for decades really, and I am curious, like what's more stable. I mean, is it the revenue that's generated from the lifestyle fashion folks, the cool kids, if you will, or on the performance side.

There's no question that we will always run our brands and.

Our businesses through the world of sport.

Yeah.

That is who we are, that's what authentic, that's what separates us, that's what differentiates us. So sport, without question, will be the driver of our business moving forward with the.

Jordan brand, I mean, do you view that as a performance brand or a lifestyle brand.

The Jordan brand was founded in the game of basketball, and I think that the opportunity for the Jordan brand is to continue to dimensionalize through sport.

We're lining up those.

Teams that I've talked about, those cross functional teams against Jordan basketball, golf, which is true to who he is as a person. It's one of his passions. And so we have Jordan Goff that also, by the way, had a really nice launch football and baseball, played baseball, and then of course streetwear. So we are pushing to dimensionalize the brand beyond just streetwear, but also position it in sport and not just about footwear, but also about peril.

I want to say on basketball for a second.

Obviously, Jordan is just a singular figure that not only helped the NBA, but certainly helped Nike. You look at the last NBA Championships with Shay gilligas Alexander with the Oklahoma Thunder winning wearing Converse, a brand that has.

Struggled a little bit.

Here, do you see any potential of using somebody like Shay to maybe help to build up a little bit more buzz for that brand.

No question.

I love what the team's doing and repositioning the Converse brand around the idea of creators.

And there are creators, of course in the world of culture, but they're also.

Creators in the games that we play, and in the case of basketball, there's probably no more special creator than Sae gilgis not only in the way that he plays on the court, but that he shows up from a from a style perspective and from a Converse I think we became very focused on the Chuck and you'll start to see his dimensionalized through basketball, through skate and then of course the Jack Purcell, which is sitting out there as well, so you'll start.

To see it more.

So you're still the messing in that.

No question, and so you'll start to see more of a a broad approach to the Converse brand moving.

Forward, there's no plans to sell off Converse. I mean, I'm sure you've heard the chatter.

Yeah, I've heard the chatter, and I've received even some of the phone calls. But no, we're committed to the Converse brand. We see it as an opportunity to address a different consumer than is the core consumer at Nike or the core consumer at Jordan. It's a separate and distinct consumer and it offers us a separate and distinct opportunity from a revenue and profitability perspective.

There was a memo that was floating around the Bloomberg News obtained earlier this week saying that there were layoffs coming at the Converse brand.

Yeah. Well, I think anytime that.

We come through with a new strategy and a new approach and a new leadership and dimensionalizing the brand, we're having to look to where we reposition resources. And again, I'm excited about the strategy that we have in place and the structure that we're putting in place. It's unfortunate, uh and and I'm empathetic to some of those teammates, but yeah, we're having a reposition somewhere we put our resources as we move forward.

But as you sort of move in this process sixteen months on the job right now, I don't want to ask you how long you're going to be here.

I mean, you know, you're sixty two, you're so young.

But what is the called me out on my age?

I mean, you know it up, but you're I mean, what are you like? Only you're only the fifth CEO of this company.

By the way, so.

You're you're You're in rare air here pun intended. And I guess the question is like, what do you want this company to be? So when you finally leave, you know, maybe many years from now, and that six CEO takes over, what is the company that you leave behind?

What is Nike?

Uh?

So here, here's what I'd say. I think Nike is like a relay race, and we have a saying that at Nike there is no finish line. And in that relay race, I think it's all of our responsibilities, it doesn't matter what job you're in, is to take that baton and to run as hard and fast as you can, and to when you hand the baton off, leave it better than you received it.

And that's my responsibility. And that's exactly what I expect to do all right.

Well, Elliott, really appreciate you joining us.

Yeah, it's my pleasure.

I really appreciate you spending time with us and allowing us to tell our stories.

So thank you so much.

All right, And hopefully you and get a check on the podium and you can see some of your athletes there. Oh.

Look, I'm definitely looking forward to going and enjoying some of the games.

So thank you so much, all right, Thank you, appreciate it. Thank you