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Nike/Foot Locker Rift Continues; Nike Dividend Improves
Published December 2, 2002
When Nike releases this month 26 limited editions of vintage Air Jordans, the company "won't be sending a single pair" to any Foot Locker outlets, according to Ralph Frammolino of the L.A. TIMES, who noted it "also is doubtful that Foot Locker will get a piece of the newest model, the Jordan XVIII, when it debuts in February at $175 a pair." Nike Brand Communications Manager Joani Komlos said that the move is "strictly business, driven by shifting alliances within a competitive industry and Foot Locker's desire to stock less-expensive items." But analysts and insiders said that Nike's decision is "nothing less than payback the latest twist in a corporate slap fest" that began in May when Foot Locker announced that it was "scaling back high-end orders and adjusting their definition of marquee shoes" to those in the $90-120 range. Nike, in turn, "slapped limits on the top-of-the-line shoes Foot Locker would get even if it wanted them." D.A. Davidson analyst Theresa Meyer: "Nike's trying to discipline them. This has kind of shaken up the sneaker world a little bit." But Komlos said, "Our relationship will continue with Foot Locker. ... It's not like they're the enemy. We agree to disagree." Foot Locker President & CEO Matthew Serra said the companies are "on course to potentially get back to some of the special initiatives we had done in the past." Serra estimated Foot Locker's business with Nike would be down $150-250M through the holiday season and into the spring (L.A. TIMES, 11/30).
STILL HIP: In China, Susan Schwartz cited an NFO WorldGroup Youth Pulse survey of 500 Hong Kong teenagers aged 15-19 as indicating that Nike, adidas and Levi's "are among the coolest and most stylish brands," and their "popularity is linked to celebrity endorsement." Nike was the top brand, listed as "cool and stylish" by 21% of respondents (SOUTH CHINA MORNING POST, 11/29).
ON THE UP: The WALL STREET JOURNAL's Shirley Lazo writes, "Nike's dividend is gaining speed again. ... S&P forecasts a fiscal 2003 (ending May 31) sales gain of 6% to 8% on steady international growth, which would outweigh the likely contraction in U.S. footwear volume." S&P sees operating margins as "flat to modestly higher," and "non-U.S. revenues could, for the first time, outgrow domestic revenues" (WSJ.com, 12/2).
WORK IN PROGRESS: In L.A., Thomas Bonk reported that Tiger Woods "will continue testing Nike prototype forged titanium head drivers that are continually being tweaked" as he "tries to find the perfect one." Woods, who has played about 173 drivers, said, "We're pretty close." Bonk noted that Nike is "determined to match Woods with the club." Nike Golf engineer Tom Stites said Woods "complicated the project because he likes to hit so many kinds of shots with his driver" (L.A. TIMES, 11/30).