Overview
Cohen Milstein represents investors in a securities class action against Nike, Inc. (NYSE: NKE) and certain directors and officers, including Nike’s former CEO, John J. Donahoe II, Nike’s current CFO, Mathew Friend, and Nike’s current Executive Chair, Mark G. Parker.
Investors allege that Nike, its CEO, CFO, and Chairman, and other defendants violated the federal securities laws by making misstatements and omissions about the success of a key corporate strategy called “Consumer Direct Acceleration” (CDA), which emphasized a digitally enabled direct-to-consumer (DTC) business model. The CDA strategy, according to Nike, had the purpose and effect of propelling long-term sustainable financial growth for the benefit of Nike and its shareholders.
When Nike’s alleged fraud was finally revealed over a series of four partial disclosures of the truth, starting in December 2023, investors saw the extent of Nike’s CDA strategy failures and its disastrous impact on Nike’s financial performance. As a result, Nike’s stock collapsed nearly 20%—the largest stock price drop in Nike’s history, wiping out billions of dollars in shareholder value
Impacted investors purchased Nike Class B Common Stock from March 19, 2021 – October 1, 2024, inclusive.
Case Background
Nike is one of the world’s largest active footwear companies, with sales of $51.5 billion in 2023. Sales made through Nike’s wholesale and DTC channels were Nike’s lifeblood, as revenues from those two channels constituted approximately 95% of Nike’s total revenue throughout the class period.
As alleged in the complaint, Nike announced its CDA strategy on June 25, 2020. CDA focused on increasing Nike’s innovative product pipeline while investing in and building out the company’s DTC channels by (1) increasing Nike’s focus on digitally-led DTC operations, including through its website and apps; (2) increasing Nike’s technological capabilities to enable those DTC operations; and (3) engaging in a massive corporate restructuring to streamline and reorganize the company’s business around key demographic categories—specifically, “Men’s,” “Women’s,” and “Kids’.” This represented a pivotal shift away from Nike’s prior approach of orienting its business around sport-based categories (e.g., running and basketball, among other sports).
During the class period, Nike repeatedly and falsely assured investors that the CDA strategy was achieving its key objectives—including, for example, that Nike had developed the technological capabilities and supply chain infrastructure necessary to effectively execute such DTC operations—and thus was succeeding in driving the promised sustainable growth. Unbeknownst to investors, however, the CDA strategy suffered from multiple, severe problems in key underlying areas—including Nike’s failure to build out the critical DTC technological and supply chain capabilities—and thus was a ticking timebomb.
When Nike’s fraud was finally revealed, it showed the extent of Nike’s CDA strategy failures and the disastrous impact on the Company’s financial performance.
- On December 21, 2023, Nike announced disappointing financial results for the second quarter of FY 2024. On this news, Nike’s stock declined nearly 12%.
- On March 21, 2024, when Nike announced another quarter of disappointing financial results (for the third quarter of FY 2024), these disclosures partially revealed the failures of the CDA strategy—the shift away from sports categorization, product innovation, brand strength, and need to pivot back to wholesale partners. On this news, Nike’s stock declined nearly 7%.
- On June 27, 2024, when Nike announced a third consecutive quarter of disappointing financial results (for the fourth quarter of FY 2024 and for full FY 2024), Nike’s stock collapsed by nearly 20%—the largest stock price drop in NIKE’s history.
- On September 19, 2024, mere weeks before the end of the Class Period, Nike’s Board of Directors announced the abrupt departure of John J. Donahoe II, CEO and key architect of the CDA strategy and a purveyor of myriad misstatements about its success.
- Finally, the full extent and financial impact of Nike’s fraud was revealed on October 1, 2024, when Nike announced yet another quarter of poor financial results (for the first quarter of FY 2025), including total revenue that was below analyst consensus estimates. On this news, Nike’s stock dropped approximately 6.8%.
From November 5, 2021, Nike’s stock dropped from $177.51 to $83.10 on October 2, 2024, wiping out billions of dollars in shareholder value.