Nike Tells Investors It Will Shift Away From 'Mediocre' Retailers
October 25 2017 - 06:00PM
Dow Jones News
By Sara Germano
Nike Inc. said it would change how it works with retailers over
the coming years, focusing on just a few dozen of them as it works
through a challenging market for sportswear makers.
In presentations to investors on Wednesday, Nike executives
emphasized the company's ongoing plans to sell more goods digitally
and directly to consumers, a shift from its longstanding model of
selling through sporting-goods stores and other traditional
retailers. As the market has grown more competitive and some chains
have gone out of business, Nike has looked to new partners like
Amazon.com Inc., as well as new efforts like selling through
Instagram.
Nike plans to continue working closely with 40 partners, ranging
from brick-and-mortar standbys like Foot Locker Inc. and Nordstrom
Inc. to newer partners like Amazon and online luxury boutique
Farfetch, on new apps and in-store experiences. It said it wouldn't
eliminate the thousands of other retail accounts that it currently
manages, but Nike Brand president Trevor Edwards said
"undifferentiated, mediocre retail won't survive."
He added: "We will be shifting away from this over the next five
years."
Shares of Nike rose 2.9% to $54.94 on Wednesday.
Nike stopped short of updating its forecast of $50 billion in
revenue by 2020, a target it set in 2015. Nike Chief Executive Mark
Parker said the company expects revenue to grow in the mid single
digits over the next five years.
Analysts polled by FactSet currently expect Nike to post $40.9
billion in sales by 2020.
The retail partnerships are meant to complement Nike's efforts
to sell more goods directly to consumers. Nike said it aims to grow
digital sales from 15% of revenue to 30% over the next five years,
a figure that includes both direct and partner e-commerce
sales.
Since its previous investor presentation in 2015, in which Nike
painted a rosy view of the sportswear market with its $50 billion
revenue goal, the industry has changed. Nike is contending with a
resurgent rival in Adidas AG, whose North American sales are on the
rise.
The Sports Authority and City Sports have liquidated, and sales
at other traditional sporting-goods chains have slowed. Basketball
shoes have fallen out of fashion in favor of classic styles like
Adidas's Stan Smith and Superstar shoes.
Neil Schwartz, vice president of business development at
industry tracker SportsOneSource, said he is concerned about the
high level of Nike merchandise currently on clearance.
"Nike is usually really good at reading the tea leaves, and
they've lost their mojo. They're more market reactive than market
proactive," he said. "I don't know how they're going to get
themselves out of this discounting situation."
Write to Sara Germano at sara.germano@wsj.com
(END) Dow Jones Newswires
October 25, 2017 17:45 ET (21:45 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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