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Nike Hopes to Woo More Women
Nike announced today that it will form a new unit to focus specifically on its women's line. Women's shoes and apparel currently contribute about 20% to revenues, and Nike wants to up that to a third. A new higher-end line and greater attention to its current women's offerings should help with that goal. With interest in women's sports at an all-time high, Nike is making a smart move into this growing market.
By
LouAnn Lofton (TMF Lou2)
August 22, 2000
Goodbye Scottie Pippen, and hello Sheryl Swoopes. OK, not exactly, but Nike (NYSE: NKE), the world's number one producer of athletic shoes, clothes, and gear, announced today that it will form a new unit to focus exclusively on its women's apparel and shoes line. (The shares fell some 10% today, perhaps on analyst comments about overly optimistic estimates for future U.S. orders.)
The division will have its own budget and marketing team, and Nike plans to increase its investment in the women's line at all points along the chain. The Beaverton, Oregon-based company will spend about two to three times as much over the next year on the women's line as it did in the previous year.
Contributions to sales from the women's line
In return, Nike hopes that the women's line will eventually constitute around a third of the company's total sales. Women's apparel and footwear currently make up about 20% of sales for Nike. For its most recent fiscal year, the women's line contributed sales of $1.55 billion to the company, so this isn't small change we're talking about here. Growing the women's business from making up 20% of sales to representing a third of Nike's total sales will be a challenge, but the company believes it's up to it.
High-end athletic clothes a new market
Nike recognizes that it faces a thick market of competitors for the hearts and dollars of women athletes and exercise enthusiasts. Companies not traditionally known for athletic clothes such as Polo Ralph Lauren (NYSE: RL) and Donna Karan (NYSE: DK) have been producing workout clothes to appeal to the market of women who want to look fashionable while sweating it out at the gym or the running trail.
Nike said it will start producing and marketing a new higher-end (and consequently higher-margin) line of athletic wear to address this market, and hopes to get the line placed in department stores. Nike then has to deal with the challenge of getting a Polo Sport shopper to buy something branded with a swoosh as opposed to a Polo label. Nike hasn't yet competed in this market, and it will be interesting to watch its success here. Nike will also continue producing its more traditional women's athletic apparel that competes against clothes from companies like Reebok (NYSE: RBK) and Adidas-Salomon AG.
Opportunity for growth
The growth potential for Nike's women's line presents the company with a good opportunity here, as women's sports hurdle their way into greater cultural popularity. The Women's National Basketball Association (WNBA) and the American Women's World Cup-winning team have both helped increase the interest in women's sports over the last few years. The upcoming Olympics and the prominence of athletes like Marion Jones also will probably contribute to a rise in women's sports popularity and marketability.
Nike is smart to up its focus on female athletes. The revenue potential the company expects to see from its increased interest and investment in the women's side of things makes the attention given to girl power worth the effort. Early evidence of the success of the women's division will hopefully show up on Nike's top-line by summer of next year, as the company's new apparel line will hit stores in the spring.
Your Turn:
Will shoppers in department stores turn away from brands like Polo Sport and towards Nike given the choice? What will the company need to do to ensure maximum success for its new women's division? Who is cooler -- Mia Hamm, or Brandi Chastain? Tell us what you think on the Nike discussion board.
Related Links:
Has Nike Hit Bottom?, News, 6/30/00
Motley Fool Stock Research: Nike
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