Has the Air Gone out of Nike? Price, Fashion, Politics Blamed for Slip in Sales

Article excerpt

After two years of ripping through the industry like a tornado, Nike Inc. is suddenly losing momentum. Retailers large and small report consumer demand for Nike products has leveled off and, in some cases, declined.

Retailers say a small but noticeable fraction of customers are avoiding the brand on principle. Alarmed by reports of labor abuses in Third World factories, some shoe consumers say they want nothing to do with the dominant name in the industry.

"We've seen a slight drop-off in Nike sales," said Pat Sweeney, president of the Fleet Feet store in Sacramento, Calif. "I think it's because of the escalating prices and because of the bad publicity the company's been getting on their labor policies." Deidre Karger of Super Jock and Jill, a popular running store in Seattle, said she hears from one to two customers a week who won't consider buying Nike because "they don't like their politics." The new consumer sentiment aggravates the two most significant issues facing Nike today. Management must cope with the slowing sales growth as well as placate investors unnerved by stock prices that have fallen by more than 25 percent in recent months. The labor controversy isn't the only reason for the downturn, or even the main one. The issue is barely a blip on some retailers' radar. But clearly the company has had to devote considerable energy to dealing with charges of worker exploitation in its Asian factories. Those charges have led to negative press and, now, lost sales. Nothing gets the attention of retailers, a critical link in the distribution chain that puts Nikes on feet around the world, like a drop in sales. At Footaction, a 480-store athletic shoe chain based in Dallas, Texas, factory conditions "haven't been an issue," spokesman Chris Anderson said. "As they say here in Texas, we don't have a dog in that fight." But when sales started to slow down, Footaction noticed. Company chairman Mickey Robinson dealt Nike stock a blow by telling analysts that athletic shoe sales couldn't keep up the brisk pace of recent years. Sales have faltered for a number of reasons, ranging from politics to the pocketbook to the vagaries of the fashion industry. Perhaps more than anything, it shows Nike is not immune from the old adage - what goes up, must come down. Nike sales exploded from $4.7 billion in 1995 to more than $9 billion in its current fiscal year (ending May 31), a 90-plus percent gain. That gives Nike an astounding 45 percent share of the domestic athletic footwear market. Double-digit percentage gains like that virtually are impossible to sustain. "How much more can that brand captivate the consumer?" asked Footaction vice president Keith Daly in trade magazine Sporting Goods Business. "The level of expectation for that to continue is just unrealistic." Carol Momoda, a buyer for Seattle-based REI Inc., echoed Daly's sentiments. "You can't expect any company to keep that up," she said. "There are always ups and downs. And I wouldn't even call this a `down.' I'd call it an adjustment." Other retailers said price has become a factor. They think too many of Nike's shoe models simply cost too much. Nike officials point out that 80 percent of the company's shoes still sell for less than $100. But a growing number boast price tags of $120, $125, even $140. "We've seen a huge slowdown in the Air Max, especially on the women's side," said Fleet Feet's Sweeney. "There's only so many people who are going to pay $140. …

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