The lawsuit is filed just days before Nike’s 2024 Q4 earnings call.
A new lawsuit accuses Nike CEO John Donahoe and CFO Matthew Friend of misleading investors over the brand’s DTC strategy.
The class action lawsuit, filed by Kessler Topaz Meltzer & Check, LLP on June 20, claims that Donahoe and Friend failed to disclose that the Swoosh’s “direct-to-consumer strategy was unable to generate sustainable revenue growth.”
The lawsuit represents those who purchased Nike class B common stock between March 19, 2021, to March 21, 2024.
During the pandemic, Nike announced its direct-to-consumer strategy which included focusing on digital channels and pulling out of numerous wholesale partnerships, such as Foot Locker, DSW, Macy’s, and others.
However, following Nike’s 2024 Q3 earnings call, Donahoe revealed that the brand would revert to its whole partners as the DTC strategy isn’t performing as intended.
“We know Nike is not performing at our potential,” Donahoe said in the call. “While our consumer direct acceleration strategy has driven growth and direct connections with consumers, it’s been clear that we need to make some important adjustments.”
Additionally, the suit also accuses the executives of not disclosing that the brand’s strategy failed to “protect the company from intense competitive pressures after Nike largely disengaged from many of its wholesale and retail partners.”
This arrives as a response to HOKA and On dominating the running market and other brands excelling in innovation — two departments that Donahoe mentioned the brand would reinvest in.
However, Donahoe attributes work-from-home as a hindrance to Nike’s innovative spirit, despite other brands not feeling the same effects at scale. Additionally, Nike laid off 2% of its workforce (740 employees) in early 2024, before the Q3 earnings call.
“In hindsight, it turns out, it’s really hard to do bold, disruptive innovation, to develop a boldly disruptive shoe on Zoom,” Donahoe said in a CNBC interview.
“Our teams came back together 18 months ago in person, and we recognize this. So we realigned our company, and over the last year we have been ruthlessly focused on rebuilding our disruptive innovation pipeline along with our iterative innovation pipeline,” he added.
The company said it expects Q4 revenue to be up in the low single digits and full-year revenue to be up 1 percent compared to the prior year.
Nike’s 2024 Q4 earnings call takes place on June 27, 2024.
Stay tuned to CerbeShops as the story develops.
(H/T Sneaker Legal)
