Nike CEO Parker Wants to Build $23 Billion Company by 2011
Nike managers said they will add 100 new company stores worldwide over the next three years as part of a plan for the world's largest athletic shoe and clothing manufacturer to reach $23 billion in sales by 2011.
Nike Chief Executive Mark Parker said Tuesday the strategy is to boost the market for both the company and its retail partners with a more personalized approach to their individual customers.
"We've got good relationships with our wholesale accounts," Parker said in an interview with The Associated Press. "And the good news is they're quite supportive of Nike's efforts to lead."
Sara Hasan, an analyst with McAdams Wright Ragen in Seattle, said the move was needed.
"Nike doesn't really have a choice," Hasan said about its decision to open the retail stores. The stores not only can help showcase Nike products, but they will also show retailers "how it's done."
Parker told an annual meeting of Nike analysts and major institutional investors the strategy is part of a new emphasis on defining consumer needs by dividing the brand into six broad categories: soccer, basketball, running, men's training, women's fitness, and sports culture.
The company had previously divided the brand into three components: footwear, apparel and equipment.
"We're fundamentally changing the way we organize the company," Parker said, emphasizing it is a growth strategy and no cutbacks are planned.
Nike, which had sales of $15 billion in 2006, hopes to tap into more of the individual needs of its customers through its stores, retailers and the Internet.
"Consumers have never held as much power as they do today," Parker said. "And clearly the power has shifted to consumers."
Nike Brand President Charlie Denson said the shift is reflected in the way the company looks at its consumer profiles. It used to consider 18- and 22-year-olds as part of the same demographic target, but now they're treated as separate and different individual markets in terms of age and their interests.
Nike, for example, wants to know if a high school senior is a basketball player or whether a college senior is a runner in addition to breaking down more traditional demographics.
"We spent the last 25 or 30 years trying to bundle things and now it's almost the reverse and we have to unbundle things," Denson said, referring to efforts to tailor products to individual consumers.
Trevor Edwards, Nike vice president for global brand and category management, noted that young women are the fastest-growing segment within a running market that now includes 20 million women in the United States.
Nike created a women's marathon in 2004 that now attracts about 15,000 runners a year and it has a dozen U.S. stores just for women, along with a dedicated Nikewomen.com Web site.
Nike also will work to improve its geographic marketing across the world, but especially in the high-growth areas of Russia, India and China -- with China predicted to become the No. 2 market for Nike products over the next few years.
"In China, 50 million kids are starting to play basketball," Denson said. "They haven't bought their first Nikes yet, but they will."
In addition to athletic shoes and clothing designed for competition, Nike hopes to expand its "sports culture" segment for its products as fashion and every day use -- such as different basketball shoes for the court and for the street.
Denson said there also is room for growth in other retail partnerships, such as the relationship Nike built with Apple Inc. to create a shoe that can communicate with Apple's popular iPod music players, allowing a runner to check on speed and pace while listening to music.
Nike also offers what it calls its Nike PLUS program to go along with the iPod Nano, allowing users to network with each other and compare notes online.
The Internet will get more attention for building a community for consumers to make them feel more connected to the company and the sports it supplies, Parker said.
"You'll see that move from a bit of a hobby for Nike to a massive commitment," Parker told The AP.
Parker repeated what he told analysts in December about Nike looking for other companies to buy. But he did not give any details or specific targets.
Parker noted that other brands Nike has acquired -- including Converse -- have shown solid growth.
He also said Nike has been effective in developing new brands and markets, noting that Nike's golf shoes, clothing and equipment brought in more than $600 million in sales last year after starting from virtually nothing about a decade ago.