Friday, April 10, 1998
Nike thinks they can bounce back in sales
Shoe industry leader fights to stay afloat despite changing
times
By Manoj Karnani
Daily Bruin Contributor
Nike, the behemoth shoemaker, best known for its brash,
rebellious attitude, poignant commercials and affinity for the
sporting world’s top jocks, has shown phenomenal growth over the
past decades. The company has made a name for itself atop the shoe
industry, becoming one of the most revered and respected brands in
the world.
Nike has racked up an astonishing $10 billion in sales and has
impressed investors with an average annual stock return of about 35
percent over the past five years.
However, times have certainly changed, and Nike has since struck
out, sending shock waves through the market as it announced last
month that revenue for the first three months of the year fell 70
percent.
Since August, Nike’s stock has struggled. The company has seen
extraordinary selling pressure as shares have fallen from a high of
$75 to about $40 a share.
In addition, Nike’s decision to change from its "Just Do It"
motto, a slogan that established the company’s identity and fueled
its growth, to the gentler tagline "I Can," has received a
disparaging retort from industry experts.
By any measure, it appears as if the company’s winning stride
has wobbled to a stop. Among Nike’s symptoms: weak sales,
ballooning inventories and smaller profits.
In addition, the company’s leading pitch man, Michael Jordan, is
talking about retiring, taking with him 13 versions of the popular
"Air Jordans" and trunk loads of apparel and gear bearing his
unmistakable name and trademark.
However, while Nike officials have failed to offer any specifics
as to why the company’s growth seems to have skidded to a stop this
year, speculation still surrounds the numerous factors that have
nonetheless taken a toll on the firm.
Among the possible problems facing the company, the Asian
economic problems have nonetheless put a serious dent in the
expansion and the vitality of the company. Nike factories which
operate throughout the region have found themselves in an awkward
position as inventories keep rising and the overpriced Nike shoes
and apparel have remained on the shelves looking for toes.
"You can’t neglect the importance of the Asian markets," said
economics advisor Edward Simms. "They represent a substantial
percent of Nike’s earnings. If Nike desires to expand in the
future, it has to come from Asia."
While the stagnation of the Asian economies have hampered Nike’s
international growth, the "brown-shoe phenomenon" in the United
States has signaled a shift of trend locally.
With such heavyweights as Timberland and Wolverine appealing to
the rugged, outdoor look and Lugz and Skechers aiming at the
hip-hop and skater groups respectively, Nike has simply been unable
to establish a niche in the industry.
"You can see that the Nikes just don’t seem to sell as well as
they used to," said Eric Gans, a shoe salesman at Athletic Express
in Sherman Oaks. "Lately the boots are doing real well like
Timberland and Skechers. I guess people’s taste have changed."
In addition, miniature Nike foes such as Reebok, Adidas and Fila
are suddenly stealing market shares from their Goliath-sized
competitor, while fashion brands such as Polo, Tommy Hilfiger and
Oakley are posing their own threat with a line of sportwear and
sneakers.
"Adidas and Fila clothing have been doing real well lately,"
said UCLA Store employee Lawrence Lam. "Sales on these items have
certainly been up."
The popularity of these other brands stems from the idea that
the Nike brand may have become too popular for its own good. With
its logo on virtually all athletic gear, the characteristic swoosh
may have become too common, and hence not as "cool" as it used to
be.
"I don’t sport Nike as much as I used to. Its not like there’s
something wrong with the stuff; the only thing is that everyone
wears it," said Sal Pineda, a first-year civil engineering
student.
Although Nike has established a powerful name for itself, it
cannot stop the upward movement of the other companies because they
offer distinct styles and more importantly, a simplicity not found
in Nike shoes. While it appears that Nike Inc. may have become
momentarily dazed by the barrage of punches thrown its way, don’t
count the company out just yet.
Later this year, Nike is expected to release its most
anticipated line of athletic gear in years, the Alpha series. With
the upcoming Alpha brand of shoes and athletic gear, the success of
the heavily-advertised Nike Fit clothing line and the
commercialized NBA playoffs looming in the horizon, Nike is poised
to emerge from the doldrums.
Although far from its inception as the bold and creative force
in the sporting world, Nike still boasts a talented management
team, a collection of the industry’s top jocks and a product line
that is as strong as ever. Despite the problems, the company
remains the industry’s front runner. And although these hurdles
have momentarily slowed down this once sure-footed company, there’s
still plenty of time on the clock and a lot of game to be
played.