Why Nike Just Did It

A new spring in Nike’s step?

Investors, and apparently some employees, breathed a sigh of relief after Nike said John Donahoe would step down next month as C.E.O. It ends a rocky four-year tenure during which the company lost market share, strained relations with key retail partners and — perhaps most worrisome — lost its cool factor.

Now, Nike is hoping that bringing Elliott Hill, a company veteran, out of retirement will reverse its fortunes. But competitors have the wind in their sails, and Nike has a lot to do to regain momentum.

Donahoe was meant to be a tech-savvy change agent. A former C.E.O. of eBay and Bain and Company, he was hired to upgrade the company’s digital sales. Among his key backers was Phil Knight, Nike’s co-founder and chairman emeritus, who had befriended Donahoe in his Bain days.

Donahoe focused on building out Nike’s direct-to-consumer sales, slashing the number of retailers who carried its shoes and cutting costs. And when decades-old shoes like Dunks became fashionable again, he pumped out countless iterations to meet demand.

But critics said he was a bad fit. Despite leading the sportswear giant known for innovation and cool, Donahoe wasn’t a sneakerhead and let Nike’s R.&D. slip. That became especially problematic when Dunks fever began to fade last year — and the company didn’t have new products to meet emerging trends.

Meanwhile, Nike’s giving up shelf space at major shoe retailers presented an opportunity for upstart rivals, including On and Hoka.

Nike’s problems came to a head in June, when the company’s stock plunged 20 percent after announcing both anemic sales growth and pessimistic forecasts for the year.

Did Donahoe lose support from key backers? Knight said in June that the C.E.O. had “my unwavering confidence and full support.” But the Nike co-founder and his son control the board via supervoting shares, suggesting that, at the very least, he was OK with replacing Donahoe.

Some investors have also noted that Bill Ackman, the outspoken sometime activist investor, also acquired a big stake in Nike, though it’s unclear whether he weighed in on the C.E.O. change-up.

Hill has his work cut out for him as C.E.O. He’s steeped in Nike culture, after a 32-year career there. And his experience — he was most recently president of consumer and marketplace — is sharply different from Donahoe’s.

But Nike has lost many experienced designers and other executives, and remains off-trend. How much time will Knight and other shareholders will give Hill to fix things?

HERE’S WHAT’S HAPPENING

Shares in Donald Trump’s social media company tumble after the lockup period ends. Trump Media & Technology Group’s stock was down sharply in premarket trading on Friday, a day after insiders were freed to sell if they wanted. The stock, which tends to trade in line with the ups and downs of Trump’s political fortunes, is more than 76 percent below its peak in March, shortly after it went public.

The hedge fund Two Sigma is said to be in settlement talks with the S.E.C. over a trading scandal. The firm could pay as much as $100 million to resolve an investigation into accusations that a senior researcher changed the hedge fund’s investment models without authorization, The Wall Street Journal reported. The penalty would come after John Overdeck and David Siegel, Sigma’s co-founders, agreed to step down.

Big money managers slash their support for environmental and social shareholder proposals. State Street, BlackRock and Vanguard cut their backing for the initiatives in the latest voting season as a Republican-led backlash against E.S.G. investing intensified.

Harris aides hit up Wall Street

Two of Kamala Harris’s top lieutenants — Tony West, her brother-in-law and Uber’s top lawyer, and Brian Nelson, her campaign’s senior policy adviser — spent the past two days in Manhattan in a whirlwind of meetings with financial executives, four people with knowledge of the matter tell DealBook’s Lauren Hirsch.

The meetings, which were organized by Raymond McGuire, Lazard’s president and a longtime Harris donor, are a sign from the vice president’s camp that her team intends to have a more open dialogue with Wall Street, which has often felt shut out by the Biden administration.

The meetings spanned 10 sessions over two days, the people said. Participants spoke in small group sessions on topics spanning crypto, technology, health care, venture capital, small businesses and regulation.

In some respects, the meetings were an extension of the dinners Harris had hosted in the past year to build bridges to the business community.

There was a focus on public-private partnerships. One of Harris’s economic focuses has been the “opportunity economy,” improving life for the middle class by lowering prices and creating jobs. Supporting the middle class, her campaign says, bolsters infrastructure and technology projects that can be huge investment opportunities. The same goes for supporting the growth of small businesses.

Attendees also offered their thoughts on ways that Harris could improve her messaging about issues such as the strength of the U.S. economy.

Some Wall Street executives voiced their frustrations, including a perceived lack of transparency and consistency from the Biden administration’s regulators. (A specific target of criticism: Lina Khan, the chair of the F.T.C.)

It’s part of Harris’s balancing act, in which she seeks to portray herself as friendlier to business than Biden has been, while not alienating progressives. Her corporate supporters tell DealBook that she genuinely wants the business community’s input.

Some backers, including Mark Cuban, say she is listening. Harris tamped down talk of a ban on price gouging after her announcement of the initiative drew sharp pushback and she has proposed raising the capital gains tax at a far lower rate than what Biden has called for. “My plan will make the tax code more fair while prioritizing investment and innovation,” she said in a speech this month.

Housing crunch

The aftershocks of the Fed’s big move on interest rates are still reverberating across markets, with the S&P 500 hitting a record high and bonds and cryptocurrencies rallying.

But the Fed’s chair, Jay Powell, acknowledged that the central bank has little power to ease pressure on one part of the economy where consumers are feeling the pinch — housing — just as affordability is gaining importance in the election campaign.

“Housing inflation is the one piece that is kind of dragging. It’s been slower than we expected,” Powell said at a news conference Wednesday after the central bank said it would lower borrowing costs by 0.5 percentage points.

The conundrum was in focus on Thursday. New data showed mortgage rates falling, but house prices continuing to rise. The lower rates could prompt a surge in mortgage refinancing, but that’s probably little comfort to desperate house hunters.

The problem is undersupply. Zillow, the real estate tracking website, puts the housing shortfall at 4.5 million units. That is pricing many potential buyers, especially younger ones, out of the market, a reality that could be influencing their politics.

The Fed’s dovish pivot won’t be a panacea. “Even if interest rates drop further, it’s not going to completely address the affordability challenge. High prices are still going to be there,” Jackie Benson, an economist at Wells Fargo, told DealBook. House prices, she added, “will continue to rise in the 4.5- to 5-percent range over the next couple of years.”

The central bank’s policy on rates influences, but does not determine, mortgage rates, which tend to track the yield on 10-year Treasury bonds. Financing costs will probably fall further, Powell said. But “the supply question will have to be dealt with by the market and also by government,” he added.

Both major presidential candidates have proposed vastly different policy fixes. Vice President Kamala Harris is promising a $25,000 benefit for first-time buyers and wants to boost America’s housing stock by three million homes.

Donald Trump says his plan to cut regulations on new home construction, open federal land for homebuilders and deport millions of undocumented immigrants would close the housing gap.

Economists are skeptical of Washington coming to the rescue. Efforts to build more homes will be helpful, Benson said, “but I don’t personally see that gap closing at any point over the next couple of years, regardless of the proposed policies or promises that come from the campaign trail.”

Masa Son is in “elephant-hunting mode”

Alok Sama was a top adviser to Masa Son, the founder of SoftBank and one of the world’s most important investors, Anita Raghavan writes for DealBook.

Now, five years after leaving SoftBank, Sama has published “The Money Trap,” a book on working with Son as the mogul built a global empire.

DealBook spoke to Sama about his time at SoftBank and what he thinks Son will do next. This interview has been edited and condensed for clarity.

Son is known to pay well over the odds to invest in a company once he decides he wants in. Where does that come from?

Masa had the opportunity to invest in Facebook at a valuation of $10 billion and he passed, and a rival investor did the deal and made out brilliantly. I remember sitting at a dinner with Masa and Mark Zuckerberg and Masa saying, “I was so stupid for not investing in Facebook.”

That clearly made an impact on him. Sometimes not being aggressive enough and not paying enough is as much of a mistake as overpaying.

What was Son like to work with?

In terms of deal making, relentless. I saw that with Arm, the chip designer. It was midsummer and the chairman of Arm was on holiday for two weeks in the Mediterranean. But Masa didn’t want to wait.

We hired private planes. Masa flew in from Tokyo, we sent another SoftBank plane to bring the Arm C.E.O. from San Jose to the Turkish seaside city of Marmaris and I chartered a plane to come in from London. The offer was made on July 3 and the deal was completed by the end of August, which has to be some type of world record for a deal of that size, particularly in the summer.

What’s next for Son?

Masa has been obsessed with the idea of artificial intelligence. SoftBank Energy is one of the largest generators of solar power, and given that energy is one of the bottlenecks in the development of A.I., that would be a logical area for investment.

Whatever he does with A.I. is likely to be significant. Masa is in elephant-hunting mode again.

THE SPEED READ

Deals

• Shares in Mobileye surged after Intel said it had no plans to divest its stake in the autonomous-driving tech company. (Bloomberg)

• Private equity firms, including KKR and Brookfield, are pushing for better payout terms from their portfolio companies. (FT)

Elections, politics and policy

• The Harris campaign has poured millions into social media advertising, vastly outspending Donald Trump on Facebook and Instagram in the days around their debate last week. (NYT)

• “Backlash Erupts Over Europe’s Anti-Deforestation Law” (NYT)

Best of the rest

• Disney will stop using Slack, after a big hack this summer that resulted in millions of messages being leaked online. (WSJ)

• Olivia Nuzzi, the Washington correspondent for New York Magazine, has been put on leave after acknowledging a personal relationship with Robert F. Kennedy Jr. (Status

We’d like your feedback! Please email thoughts and suggestions to [email protected].

The post Why Nike Just Did It appeared first on New York Times.