Nike Tells Investors It Will Shift Away From 'Mediocre' Retailers

By Sara Germano Features Dow Jones Newswires

Nike Inc. said it would change how it works with retailers over the coming years, focusing on just a few dozen of them as it works through a challenging market for sportswear makers.

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In presentations to investors on Wednesday, Nike executives emphasized the company's ongoing plans to sell more goods digitally and directly to consumers, a shift from its longstanding model of selling through sporting-goods stores and other traditional retailers. As the market has grown more competitive and some chains have gone out of business, Nike has looked to new partners like Amazon.com Inc., as well as new efforts like selling through Instagram.

Nike plans to continue working closely with 40 partners, ranging from brick-and-mortar standbys like Foot Locker Inc. and Nordstrom Inc. to newer partners like Amazon and online luxury boutique Farfetch, on new apps and in-store experiences. It said it wouldn't eliminate the thousands of other retail accounts that it currently manages, but Nike Brand president Trevor Edwards said "undifferentiated, mediocre retail won't survive."

He added: "We will be shifting away from this over the next five years."

Shares of Nike rose 2.9% to $54.94 on Wednesday.

Nike stopped short of updating its forecast of $50 billion in revenue by 2020, a target it set in 2015. Nike Chief Executive Mark Parker said the company expects revenue to grow in the mid single digits over the next five years.

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Analysts polled by FactSet currently expect Nike to post $40.9 billion in sales by 2020.

The retail partnerships are meant to complement Nike's efforts to sell more goods directly to consumers. Nike said it aims to grow digital sales from 15% of revenue to 30% over the next five years, a figure that includes both direct and partner e-commerce sales.

Since its previous investor presentation in 2015, in which Nike painted a rosy view of the sportswear market with its $50 billion revenue goal, the industry has changed. Nike is contending with a resurgent rival in Adidas AG, whose North American sales are on the rise.

The Sports Authority and City Sports have liquidated, and sales at other traditional sporting-goods chains have slowed. Basketball shoes have fallen out of fashion in favor of classic styles like Adidas's Stan Smith and Superstar shoes.

Neil Schwartz, vice president of business development at industry tracker SportsOneSource, said he is concerned about the high level of Nike merchandise currently on clearance.

"Nike is usually really good at reading the tea leaves, and they've lost their mojo. They're more market reactive than market proactive," he said. "I don't know how they're going to get themselves out of this discounting situation."

Write to Sara Germano at sara.germano@wsj.com

(END) Dow Jones Newswires

October 25, 2017 17:45 ET (21:45 GMT)