Why Nike Should Be Scared of Women -- Heard on the Street
April 07 2018 - 10:59AM
Dow Jones News
By Elizabeth Winkler
Does a boys-club culture where women struggled with pay
inequity, inappropriate behavior, and poor representation in the
company's top ranks make Nike a more valuable company?
Will women, who have powered the company's growth in recent
years, buy more Nike gear after hearing these revelations? Stock
investors seem to think so.
Nike shares rose 10% from their low last week after The Wall
Street Journal reported about Nike's culture. Shares kept rising
after a memo surfaced from the company's top human-resources
executive saying Nike "has failed to gain traction" in hiring and
promoting women and minorities. The stock fell 3% in Friday's big
selloff.
Nike, a brand built on empowerment and inclusion, has focused
some of its most high-profile campaigns specifically on empowering
women and girls -- from its 1995 ad "If You Let Me Play" to last
year's "Equality" campaign. Now it looks increasingly like Nike has
broken its promise.
Nike's troubles started last month, when two top executives
resigned after an internal review sparked by the concerns of women.
That and the subsequent revelations about the company's culture may
make consumers, especially women, rethink their allegiance to Nike,
says Trevor Wade, Global Marketing Director at Landor, a
brand-consulting firm.
This is important because Nike is the No. 1 sports brand for
women and girls globally. Last year Nike's women's business brought
in over $6.6 billion in revenue, and it has been growing at a
faster rate than the company overall -- about 12% a year since
2013.
If sales to women flag, the company will struggle to meet the
targets it has set, especially in its domestic business. Yet as Ms.
Wade points out, "there is no shortage of athletic brands to choose
from, especially when it comes to women-focused brands like
Athleta, Lululemon, Lucy, Lorna Jane, Fabletics, and Title
Nine."
Meanwhile, rival Adidas is growing faster than Nike, especially
in North America, where Nike's business has declined recently.
Adidas's constant currency sales surged 27% in the region last year
as the German sportswear group stole market share from Nike.
Nike's leaders clearly understand the risks they face: They have
acknowledged the company's shortcomings and appear to be taking
steps to address them. That response may keep consumers from
drifting away. And it's worth remembering that much of Nike's
genius lies in its marketing. If it can tell the right story about
the brand's desire to do better by women, consumers may be willing
to forgive.
Investors, though, are acting as if the company has been
forgiven already. Even if one in 10 women customers reaches for
another brand for just a few months, Nike's earnings and its stock
will take a hit. Nike is all about going faster, but in this case
investors should take it slow.
Write to Elizabeth Winkler at elizabeth.winkler@wsj.com
(END) Dow Jones Newswires
April 07, 2018 10:44 ET (14:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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