NKE - CFO Retirement = Negative Development

Takeaway: This is a bad event. The business is absolutely fine – no issues there. But Blair is as good as they come. Stay away for now.

There’s no sugar-coating this announcement from Nike that CFO Don Blair is retiring. We’ve always said that there’s only one person we’d be worried about leaving Nike, and that is Don.  The reason is that aside from having tremendous credibility with the investment community, Don has served as a critical bridge for Mark Parker (CEO) into the world of cost management, capital deployment, and ROIC – which is key for a CEO who is otherwise (brilliantly) focused on brand, design, and the consumer.  

 

To be clear, we’re pretty certain that this is not a sign of an impending blow up. Business at Nike is fine, and he is leaving while he’s on top. In fact, to his credit, Don would absolutely not leave if the company was trending in the wrong direction – and he’ll be there until October 31 of this year. Anyone looking for a blowup during that time period will be disappointed.

 

Andy Campion is perfectly appropriate as a CFO for Nike, Inc. – but as much as people will argue that serving as CFO of the Nike Brand prepared him for this job, we’d say that there is a massive difference between being the CFO of a subsidiary (albeit a huge one) and being the outward-facing CFO of a company that's in the top 10% of the S&P 500. Even Don Blair had an extremely painful initial 2-3 years while he navigated through the confusing internal forecasting process inside Nike. The fact is that Don is one of the best CFOs that I (McGough) have known in 22 years.

 

The learning curve for his successor will be steep. And keep in mind that Don fought hard (and won) serious clout for the Finance organization in a company that is traditionally Brand and Marketing-driven. With Don no longer as the anchor, we think we’re likely to see more political tussles internally – potentially for a few years – while the new regime is established.

 

We’re taking Nike from our Long list to our ‘Bench’ until we get more comfort in organizational structure. If we were looking at an 18 multiple, we’d hang in there. But at 23x, we’d rather wait. 


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