Nike Inc. held their bi-annual Investor Day entitled “The Customer Decides” in Portland last Tuesday and made a number of very important and unusual announcements to the attendees. They presented, in an uncharacteristic amount of detail, the company's long-term strategies to continue driving global growth and market leadership of the Nike brand and it subsidiaries.

The first big news was that the company now targets revenue growth of $8 billion to reach $23 billion by fiscal 2011, spread across its entire brand portfolio. It is uncharacteristic for NKE to be so bold and so specific in an announcement like this. Management expressed this goal in a nearly religious format with the symbol “23:11.”

Over that five-year period the company expects to get 75% of this growth from the Nike brand and will be driven by a “consumer-defined” strategy. Focused on “creating premium consumer experiences built on product innovation, brand leadership and elevated retail presence,” Nike expects deeper market penetration in all geographical regions. In addition, the company continues to target long-range mid-teens earnings per share growth.

Nike Inc. President and CEO Mark Parker was clearly in charge of the show, stating “As the market leader, we have the ability and the responsibility to take the industry and our partners to a new and better place. The ability to connect with consumers is the single most important competitive advantage in our industry today. Nobody does this better than Nike. Our vision is clear. I've never been more excited about our opportunities.” Parker also reminded listeners of the core Nike principal, “the brand will always be our most important asset.”

Nike Inc. subsidiaries delivered total revenues of nearly $2 billion in 2006 and are expected to provide the other 25% of the corporate growth, which means essentially doubling these businesses. Over the last five years, they have already seen sales double. Cole Haan and Exeter were called out as particularly important growth drivers. Nike was more candid than usual about their “Other” brands, citing the following 2006 volume figures: Nike Golf, $600 million; Converse, $450 million; Cole Haan, $450 million; Hurley, $130 million; Exeter, $36 million; and Bauer/Nike Hockey, $150 million. This additional $2 billion in sales does not include any potential acquisitions, which Nike insists are still on the horizon.

Management also revealed that the Jordan Brand is now $700 million worldwide and that worldwide soccer sales exceeded $1.5 billion in 2006. They also disclosed that the Nike outlets handle 70% of Nike closeouts and are planned to ultimately handle 80%.

Mr. Parker and Trevor Edwards, Nike VP for global brand and category management, detailed the new category alignment strategy, which is headed by Edwards. VPs have been created across footwear, apparel, and equipment in six core categories: running, basketball, soccer, women's fitness, men's training, and sport culture. The categories, which currently comprise 76% of revenues, could drive 75% of growth over the next five years, said Charlie Denson, Nike brand president. “Focusing on these opportunities will make a difference, and if we win these six categories, it'll be game over,” said Denson.

The company expects to grow geographically in all regions. Nike will drive sales in the United States, EMEA, Japan and China, and the Americas. The U.S., UK, Japan, and China accounted for 61% of total Nike brand revenues in 2006. In addition to those markets, Nike also will invest aggressively in emerging markets.

Countries such as Russia, India, and Brazil, were cited as having the potential to each become a billion-dollar market. China will be a billon dollar market next year and will ultimately be the third largest market in the world.

The other major announcement was that Nike would be entering the mall-based retail business. While this message was anticipated in the financial market, the announcement was relatively low key. Over the next three years, the company anticipates opening approximately 100 mall-based Nike-only stores worldwide, half of which are expected in the U.S.

Citing a “responsibility to lead,” the stated intention of the retail initiative is “to elevate the brand experience, position the Nike brand in the world's premium shopping locations, and test innovative retail concepts that can serve as a growth catalyst for the specialty athletic retail industry.” This new retail initiative will have “customer-focused formats.”

“Becoming a better retailer will help us be a better wholesale partner,” Parker said. By 2011, the company expects Nike direct-to-consumer sales, which include inline stores, factory outlets, and e-commerce, to increase to 15% of sales or $3.5 billion, up from the current 12% ($1.7 billion). Growth will come from all three Nike direct-to-consumer categories, but the company would not specify the magnitude of each segment.

With the current $1.7 billion coming from 400+ company-owned stores and e-commerce platforms, it would seem that Nike will need more than the 100 declared doors to double that volume. The company also expects to open segmented concepts within their key retail partners in the United States over the next two years.

Parker said, “In today's world, power has shifted away from traditional brand growth models to growth driven by the power of consumers. No one is better positioned than Nike to take advantage of this. We will drive growth and build shareholder value by embracing the power of the consumer and creating a new marketplace.”


>>> No word yet whether Nike will be passing out signs at games so consumers can help proclaim Nike 23:11 instead of John 3:16…