Nike’s empire grows bv leaps and bounds
BEAVERTON (AP) - Few, if
any, American businesses can
match the phenomenal growth
of the Nike athletic shoe empire
over the past five years
Nike sales have exploded
from $28 7 million in 1977 to
$457.7 million in fiscal year 1981
— a growth of 1,600 percent Net
income grew from $1 5 million
to $25 9 million in the same per
iod
The Beaverton-based
company overtook Adidas of
Herrogenaurach, West Ger
many as the top seller of
athletic shoes in the United
States last year and now is
taking on the international
market
Nike's annual growth rate, in
revenue, over the last four years
has been 247 percent, 211 per
cent, 180 percent and 170 per
cent
Nike's trademark "swoosh”
can be seen on the feet of such
noted athletes as Sebastian
Coe. John McEnroe and Dan
Fouts
Now, with the U.S jogging
and running market saturated
with Nikes, the company —
named for the Greek goddess of
victory — is looking for new
horizons to conquer.
"We won't grow as a
company that fast," says Nike
President and Board Chairman
Phillip ''Buck'' Knight, "but
certain areas will grow that
fast ”
Nike’s new targets are the
children's market, cleated
shoes, foreign sales and
apparel
"All of those programs are at
varying degrees of maturity,"
Knight says, glancing around
the company's new and already
overcrowded headquarters
“Children's is the one that's
contributing the most now, so I
would think it would continue to
grow really fast for a few years,
then it will begin to slow down,"
Knight says, "but by then cleat
ed should be up and running
hard and the other two right
behind it ”
Children's shoes amounted to
15 percent of Nike's sales or
$64.3 million last year That was
up from 8 percent the previous
year
Cleated shoes, such as those
used tor football and soccer,
were just 2 percent of Nike's
business last year
"That amounted to $8 million
in sales last year, which is vir
tually nothing,” Knight says
"The apparel line is being
well-accepted,” Knight says
"It's a fairly narrow line and it
will gradually broaden I think
it's increasing in sales at a fast
rate but still is about 7 percent of
our total sales, whereas we
believe it's about 40 percent of
our major competitor’s sales."
When Knight talks about the
major competitor, he means
Adidas, still the worldwide
leader in athletic shoe sales
Knight wants Nike to
challenge Adidas on the world
market He sees Europe,
Canada and Japan as the areas
with the biggest potential.
To spearhead the interna
tional movement, Nike hired
former U\S Transportation
Secretary Neil Goldschmidt as
its vice president for interna
tional marketing
Sales in the European market
have been hampered by steep
duties on imports from coun
tries that aren't members of the
European Economic Com
munity. Nike is getting
around that problem by building
a factory in Ireland, scheduled
to begin production late this fall
Knight, now 43 and a former
University distance runner,
joined with his old coach Bill
Bowerman to design and
distribute Tiger-brand shoes in
the United States
That agreement fell apart in
1972 and Nike's predecessor,
Blue Ribbon Sports Inc., nearly
went bankrupt
"That was the most crucial
time," Knight said "I wasn't
going to give it up but I thought
for awhile the banks might give
it up I was confident we could
do it again and do it better."
Nike was born in 1972 and
took its only loss that year
"The financial institutions
after that first year were really
down on us," Knight said "But I
was more upbeat then than I
was the year before when we
were starting it out, because
we'd increased our sales 50
percent so we were in the
marketplace. We were there."
Knight said a person who in
vested $10,000 in Nike at the
start would have an investment
worth $6 6 million today, and he
said Nike has made many peo
ple millionaires.
Knight’s Nike stock alone
makes him worth $175 million
and he draws an annual salary
of $250,000 He has been de
scribed as the richest man in
Oregon, a title he detests.
"I hate that,” he said "It (the
stock) is a million miles from
being in total liquidity "
The next big break came
when Bowerman used his wife’s
waffle iron to design the famed
"waffle’’ sole for Nike’s running
shoe The new style caught on
among many top runners and
was a big seller
Later, a second breakthrough
in style occurred when Nike
purchased the air-sole, de
signed by an aerospace engin
eer who had been turned down
by four other shoe companies
before he came to Knight.
Nike "went public” last year
and its recently-released annual
report provided the first glimpse
at the .figures behind the
company’s success story.
But Nike’s stock has
languished since it went on the
market a year ago The stock
came out last December at $22
per share bid on the over-the
counter market. This week it
was at $19
“I wish it was higher,” Knight
said “I’m disappointed that it
isn’t But when the offering
came out for the first time, I
invested in common shares
other than Nike I invested in a
hundred shares of IBM, Boeing,
FMC, Royal Dutch Petroleum
and Mattel Toys That was on
Dec. 3 and since then Nike's
been better than all five of them.
So we haven’t been alone.”
The company makes only
about 15 percent of the 30 mil
lion shoes it sells each year.
Most of the others are made
under contract in South Korea
and Taiwan.
Nike also has contracted to
produce its shoes at four
factories in China — two in
Shanghai and two in Tientsin.
Production in China is
scheduled to start in late Oc
tober.
However, Knight insists the
company has strict quality con
trols and doesn’t take
advantage of cheap labor over
seas
“Our margins on the foreign
made stuff are about the same
as our U.S.-made stuff,’’ he
said.
How has Nike managed to
succeed so well while so many
others have failed?
“We’ve had good people,"
Knight said. "We've been able
to grow through a lot of
problems. Other people have
had those problems and haven’t
grown through them. I think the
difference is in the people, and
we’ve been lucky to some extent
— the right place at the right
time. Running just went crazy."
And the Greek goddess of
victory smiled all the way to the
bank.
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