June 27, 2016
By Matt Townsend
The race to run the world’s biggest sports brand is now a three-way contest.
Nike Inc. Chief Executive Officer Mark Parker isn’t going anywhere just yet, but an April shakeup in the executive ranks has set off speculation that an internal battle is brewing for the opportunity to succeed him. The payoff: a chance to lead an iconic company whose sales are expected to grow to $50 billion by 2020 from $30 billion last year.
Michael Spillane proved to be the big winner in the management reshuffling: He was promoted to president of product and merchandising, continuing his rapid rise. Coming after he led a turnaround of Nike’s China unit, the move put him in charge of a huge swath of the company’s operations. It also placed him smack in the middle of the race to replace Parker — alongside Chief Operating Officer Eric Sprunk and Nike Brand President Trevor Edwards, who is seen as the leading candidate.
“He’s been thrown into some tough spots and came out looking strong,” Brian Yarbrough, an analyst for Edward Jones, said of Spillane. That and the latest promotion put Spillane “in the running.”
Parker, 60, will earn a huge stock award if he stays another four years, so he may remain until then, which would please investors. The stock is up about 400 percent since he took the helm in 2006. Given that performance, his tight relationship with Nike co-founder Phil Knight and that he’ll likely replace Knight as chairman, Parker has a good shot at staying for as long as he wants.
In the interim, investors will be watching how the three executives perform, looking for signs of who might be gaining an edge.
Spillane’s five major promotions in nine years are noteworthy. He joined Nike in 2007 at its Converse brand after holding CEO jobs at fabric makers Polartec and Malden Mills. In 2009, Parker promoted him to the top post at Converse. Less than two years later, he was handed a struggling Umbro brand, which Nike had acquired three years earlier. He polished it up, and within 18 months Nike sold it for $225 million in cash.
Spillane, 56, put out another fire in May 2013 when he took over the foundering China business. The Asian nation is Nike’s second-largest market after the U.S. and was one of its fastest-growing segments. But that all faltered when a glut of inventory sank orders and Nike’s revenue in the region declined.
A year after Spillane’s arrival, China began growing again, with annual sales up 5 percent. The region’s revenue surged an additional 18 percent the next year. In the company’s most recently reported quarter, China’s sales growth accelerated to 23 percent. The division also became more profitable, with earnings before interest and taxes up 43 percent to $358 million, good for 31 percent of Nike’s total.
Spillane spent less than two years in China before Parker promoted him in March 2015 to head global footwear, where Nike generates 60 percent of its revenue. In a little over five years, he went from overseeing Converse, with about $900 million in annual sales, to running a unit that generates $18 billion.
Under Spillane, the footwear unit remained the strength of the company, with sales advancing 17 percent, excluding changes in currency, over the three quarters through February. The company will report its latest results on June 28.
A spokesman for Nike declined to comment on the CEO race.
In April, Parker promoted Spillane for a fifth time by naming him to lead all product and merchandising. He now reports directly to Parker, just like Edwards and Sprunk.
While Nike could look outside for its next CEO, it’s unlikely. The company did that once before, naming William Perez CEO in 2004 to replace Knight. Perez lasted less than two years before Knight asked him to resign. The company then named Parker, a Nike lifer, as his replacement.
Parker learned the value of internal competition from Knight, who put him in a race with Charlie Denson for the top job. Denson and Parker both joined Nike in 1979 and worked their way up opposite sides of the business. Denson started in store management and had several roles in sales and operations, while Parker began as a designer and shifted into marketing. In 2001, Knight named them co-presidents of the Nike brand, setting off a battle for CEO that Parker won.
Knight, 78, chose Parker because of his background in product innovation and marketing — the core of Nike’s success. Edwards, 53, has similar experience on that side of the company, which is one of the reasons he’s been considered the favorite. He joined the Beaverton, Oregon-based company in 1992 at age 31 as a regional marketing manager and a decade later had advanced to president of global brand management. Edwards was then named chief marketing officer before replacing Denson in 2013 as president of the Nike brand, which has long been viewed as the No. 2 job.
That’s why Edwards has been seen as having a better path to CEO than Sprunk, 52, who joined Nike in 1993 in the finance department. Sprunk did, however, transition into category management and merchandising before being named operations chief in 2013.
“I think it’s Trevor unless he does something that is detrimental to that path,” Yarbrough said. “He’s on that path right now, but there’s a lot of time between now and then.”