How Nike became No. 1. And how it plans to stay there

How Nike became the most powerful name in sportswear
How Nike became the most powerful name in sportswear

Nike is the biggest sneaker maker in the U.S., putting it ahead of rivals Adidas and Under Armour. Its dominance in sports retail is undeniable. And it's also just an all-around beloved brand, among teens, adults and everyone in between.

But what comes with being the best in the business is the ever-present threat of losing that top spot. Nike still has its work cut out for it.

Nike shares, which have a market value of more than $130 billion, have rallied more than 15% this year and on April 18 hit an all-time high of $90. As of Friday's close, the stock was trading around $85. Nike's growth is better than the S&P 500 Retail ETF's (XRT's) gains of about 3% year to date. But Lululemon shares are up roughly 50% so far this year, while Under Armour shares have gained 48%.

For Nike, a recent sales slowdown in the U.S. could threaten its gains. It needs to keep investors believing its future success is multi-fold, and steps are being made to keep momentum alive.

The primary focus for Nike in 2019 is selling more directly to consumers. So it's been investing in e-commerce, building tech like a foot-scanning app that tells users their accurate sizes, opening more stores and trying to clean up third-party marketplaces including Amazon.

Nike is making a bigger bet on women, as the overall market in the U.S. for women's shoes and clothing is much larger than that of men's. Sales to female shoppers still represent less than 25% of Nike's total revenues.

But Nike has also made headlines for its unfair treatment of women — its own employees and the female athletes it sponsors. Olympic sprinter Allyson Felix said in a May op-ed with The New York Times that Nike wanted to pay her 70% less after she gave birth because she couldn't maintain her same performance levels. Nike has since said it's changing contracts for female athletes to protect their pay during pregnancy. It needs to overcome these missteps, and avoid further mistakes, if it wants to sell more to women.

Despite the heat it's taken for this instance — and for controversial marketing campaigns, like one featuring former San Francisco 49ers quarterback Colin Kaepernick — many customers seem to not think twice about the drama that sometimes surrounds Nike. Its sales have climbed each year since 2011.

"Digital prowess, a robust product pipeline, increasing speed-to-market capabilities, improved offerings in the moderate channel, and targeted focus on the women's category are driving topline growth & margin expansion," for Nike, said Susquehanna analyst Sam Poser.

Nike is set to report its fiscal fourth-quarter and annual results after the bell on June 27.