Nike Pulls Ahead as Leader over Reebok

By Mcgill, Douglas C. | THE JOURNAL RECORD, July 12, 1989 | Go to article overview
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Nike Pulls Ahead as Leader over Reebok

Mcgill, Douglas C., THE JOURNAL RECORD

After falling behind Reebok in the race for the $4.5 billion American market for sports shoes, Nike Inc. is once again pulling ahead.

What is more, as both companies stretch beyond athletic shoes to sports apparel - Nike is emerging as the clear leader.

The company has achieved the turnabout not only through its diversification but also through a new niche-marketing strategy, a keen sense of fashion and an advertising campaign that exalts sweaty joggers and slam-dunking basketball stars.

Nike's good fortune was underscored Monday when the company reported its profits.

Earnings per share were $4.45 in the fiscal year 1989, up 64.8 percent from $2.70 in the previous year. Nike's shares dropped $1 each on Monday, to $42.75.

Analysts said Nike's stock price already reflected the company's success.

Nike, which pioneered the ``performance driven'' market with shoes designed for serious runners, is maintaining its lead in that area.

And now it is making strides in the marketing of shoes for the fashion-oriented customer - an area where Reebok has been strong.

Reebok, whose shoes are still popular but are no longer phenomenally so, is trying this year to bolster its sales with a new line of shoes designed for serious athetes.

``Nike is hitting on all cylinders,'' said Alice Ruth, financial analyst for Montgomery Securities.

``They lead the race in terms of consumer demand and retailers' confidence in the brand. There is one buzzword among retailers now, and that's Nike.''

After explosive growth in the 1970s and early 1980s, Nike lost its dominance in athletic footwear to Reebok, which became one of the biggest brand-name phenomena of the decade.

Starting almost from scratch in the early 1980s, Reebok International Ltd. was by last year a $1.79 billion-a-year business, compared with Nike's sales of $1.2 billion.

Both the Reebok and Nike figures include apparel and other company brands. In athletic footwear alone, Reebok had 26.7 percent of the market and Nike 23.3 percent.

But today, Reebok is struggling.

It posted its first earnings decline, around 20 percent, in 1988, and is hoping for a big back-to-school season this year to revive flagging sales.

This year, in the U.S. footwear market alone, Nike's sales are likely to exceed Reebok's - $1.25 billion compared with $1.21 billion, said Heidi Steinberg, analyst at Salomon Brothers.

Nike's market share will therefore be an estimated 25 percent, against 24.2 percent for Reebok.

To a large degree, Nike's current surge is based on a new marketing strategy, forged around two years ago, that broadened the company's focus far beyond athletic shoes.

The company identified about a dozen niche markets - like basketball, running, tennis and water sports - and now sells not only shoes in each category but also apparel and accessories.

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