Nike looks for ways to regain market share, boost stock
Bloomberg News Service
Beaverton, Ore., — Nike Inc. Chief Executive Phil Knight may be going back to the footwear formula he pioneered almost 40 years ago: low-price, high-tech shoes sell.
That idea, which Knight described in the thesis he wrote to graduate in 1962 with an MBA from Stanford University, helped him build the largest U.S. athletic-shoe maker.
Knight, 63, needs to prove that what worked then may work again. U.S. shoe sales had declined four consecutive quarters before they unexpectedly rose
1 percent in Nike's fiscal fourth quarter ended May 31.
"I don't think investors are happy with the performance of the company," said analyst Jeff Edelman of UBS Warburg LLC. "Some say they are a victim of their success."
Analysts said Knight lost touch with some consumers who balked at paying more than $90 for shoes as the U.S. economy slowed and unemployment rose. Nike plans to introduce more shoes priced between $60 and $90 in the next year to help regain market share lost to rivals such as Reebok International Ltd., analysts said.
The company's new mid-priced shoes "are among the best styled shoes Nike has offered into the U.S. marketplace since 1996," wrote analyst John Shanley of Wells Fargo Van Kasper in a report.
The new products may include lower-priced versions of its expensive shoes, such as the $150 Shox, which have spring-like heel support, analysts said. Nike's higher-priced products also include $140 Air Max men's running shoes, $160 Air Jordan XVI men's basketball shoes and $120 Air Jordan XI Retro Low basketball shoes.
Selling more mid-priced shoes may not be enough. Nike last year already held 43 percent of the $7.81 billion U.S. athletic- shoe wholesale market, which has hovered between $7 billion and $8 billion the past five years, according to industry newsletter Sporting Goods Intelligence.
"Athletic shoes are not a growth business in the U.S. anymore," said portfolio manager John Maack of Crabbe Huson Group. "The significant issue is, where do they find new avenues of growth?"
Knight is expected to increase sales of children's and outdoor shoes, as well as equipment, which includes sunglasses, golf balls and watches, analysts said.
Nike also is dabbling in fashion and expanding its women's business. Earlier this month, the company said it plans to open stores in malls for women.
Reduced consumer interest in sports has led Nike to offer non- athletic shoes, analysts said.
Its Presto line of slip-on shoes, for example, comes in 30 color combinations and doesn't appear to have much athletic functionality, wrote analyst Faye Landes of Sanford C. Bernstein & Co.
Nike "is vulnerable to a shift in consumer, and especially teen, interest away from traditional sports with which the company is so closely identified," Landes wrote. "We are very interested in hearing how the company intends to mitigate its fashion risk."
