In a shocking turn of events, Nike CEO John Donahoe is under fire as the sportswear giant's fiscal 2025 guidance fell short of expectations, leading to a barrage of downgrades from several investment banks. The disappointing outlook has triggered doubts about Nike's management and eroded the company's once unshakeable credibility.

On Thursday, Nike delivered a grim forecast, revealing that sales in the current quarter were anticipated to plummet by a staggering 10%. This figure far surpasses the projected 3.2% drop by LSEG and follows the company's slowest annual sales gain in 14 years, excluding the impact of the Covid-19 pandemic. Furthermore, the company shocked investors by revising its fiscal 2025 sales expectations downward, now anticipating a decline in mid-single digits as opposed to previous expectations of growth.

As a result of the disappointing guidance, Nike's stock tumbled a staggering 20% on Friday, marking one of its worst trading days on record and causing its market value to hover around $114 billion. The market reaction forced at least six investment banks to downgrade Nike's stock, with analysts from Morgan Stanley and Stifel expressing skepticism about the company's management.

Stifel analyst Jim Duffy raised concerns about Nike's prospects for growth, citing the downward revisions in consensus estimates for the fifth time in six quarters. He noted that the company's management credibility was severely challenged, further adding uncertainty to the situation and implying the potential for a change in the C-level regime. This sentiment echoed the sentiment of other analysts who believe that a management shake-up is necessary.

Since assuming the role of CEO in January 2020, Donahoe has faced growing criticism. Nike's stock has declined by approximately 25% during his tenure, underperforming both the S&P 500 and the retail-focused ETF, XRT. Critics contend that Nike's recent lackluster performance can be attributed to several factors, including challenges in the Chinese market, unfavorable foreign exchange headwinds, and problems resulting from the company's strategic shift under Donahoe's leadership.

The company's decision to scale new styles, reduce emphasis on classic franchises, and repair relationships with key retail partners after years of cutting them off in favor of a direct-selling strategy has negatively impacted wholesale orders. Furthermore, Nike's core franchises, such as Air Force 1s, Air Jordan 1s, and Dunks, have failed to capture the attention of loyal customers who are increasingly turning to upstart competitors for fresh styles and innovative designs. This strategic misstep has allowed competitors like On Running and Hoka to gain market share at Nike's expense.

The discontent within the investment community surrounding Nike's performance has prompted calls for a change in management. Analysts and industry experts argue that the company has failed to respond to significant shifts in consumer preferences, particularly the increasing popularity of running. They suggest that a visionary leader is needed to steer Nike back on track and capitalize on emerging trends.

In the midst of the mounting criticism, Nike founder and chairman emeritus Phil Knight expressed unwavering support for CEO John Donahoe. Knight believes in Nike's future plans and remains optimistic, stating that Donahoe has his full confidence. However, as pressure mounts, speculation has emerged about the potential for a leadership change within the next six months.

John Donahoe's tenure as CEO of Nike has been marked by significant challenges, including the Covid-19 pandemic and shifting consumer preferences. While annual sales have grown under his leadership, the recent dismal guidance and subsequent market reaction have raised doubts about his ability to lead the company successfully through these turbulent times.

As the situation unfolds, all eyes are on Nike as investors and stakeholders eagerly await updates and possible measures to address the company's mounting challenges.