By Claude Solnik and Georgia Lee
MEMPHIS -- At its first stockholder meeting outside of Oregon, Nike last week downplayed stories about its step back from the swoosh and unveiled plans to build its Michael Jordan brand beyond basketball and athletics.
With protestors outside chanting "Sweatshops have to go," CEO Phil Knight led the meeting with about 1,500 stockholders. At the event, held in the city housing Nike's biggest distribution center in the United States, Knight said the firm had been made the "poster boy for the global economy." The company pointed to initiatives it had taken, from removing toxins in factories to raising wages.
Knight also said Nike planned to build brands within the company such as its Jordan name and its Alpha high-performance umbrella, which debuts next spring. Nike said it will release its first Jordan sneaker for less than $100, expand the brand into other sports and possibly into casual and dress footwear. While the firm has said it will downplay the swoosh in ads, Knight denied Nike would bury the logo in product; he cited a New York Times Magazine article as the source of that story.
"That was never what was told to that writer," said Knight at the event, which had the feel of a revival. "Essentially, what was told to that writer was our trademark, our assets and our swoosh, the elimination of any one of those is suicidal or crazy."
The 18th stockholders meeting also came days after Nike announced a precipitous drop in earnings for its most recent quarter. Nike's net income for its last quarter sank 35 percent to $163.8 million from $253.1, on revenues down 9 percent to $2.50 billion from $2.77 billion. Footwear revenues dropped 19 percent, while apparel rose 6 percent.
"In the short term, we saw saturation," Nike Chief Operating Officer Tom Clarke said of a U.S. market flooded with Nike footwear, "too much overlap of product through those [retail] accounts."
Nike has laid off 1,600 associates this year. Nike also said, while business has been tough, there are signs of a turnaround. U.S. footwear future orders sank 13 percent for its first quarter, 7 percent its second, and are approaching flat for third-quarter footwear ordering. Clarke said he thought future footwear orders would be up for the fourth quarter.
And then, for much of the meeting, Nike gave its first glimpse of plans to move its Michael Jordan line from a signature shoe to a powerful standalone company. Nike painted a picture of a brand extending far beyond basketball and athletics and into fashion, focusing on Jordan's style more than skill.
"We're not just a running company, not just a basketball company. We are many different companies," said Clarke. "We're really striving to sharpen up our product and our marketing. Nowhere is that more important than what we're doing with our Jordan Brand."
Nike said it was signing other athletes to the nearly rookie brand, which it only recently broke off in to a standalone company. And it is seeking to position the brand so it will remain strong well beyond Jordan's retirement.
"I don't think Michael truly knows what he's going to do," said Larry Miller, president of Jordan Brand. "What we are doing is approaching the business with a strategy we think will work, whether Michael plays another two years or three years or he doesn't."
Analysts said Nike easily could build a brand far beyond basketball around Jordan, but questioned whether it would work in women's product.
"Going beyond [footwear] with a sports icon, it could have some potential," said Josie Esquivel, analyst with Morgan Stanley & Co., adding about women's product, "I think that's a bit of a stretch."
Nike has been trying to sell more to women. Clarke said Nike's women's concept shops have been "fairly successful" and plans to open 50 more by next spring. The company said the Jordan product for women would be part of those efforts.
"Michael really transcends sports. He transcends basketball. He also transcends race, gender, income, age," Miller said.
Miller talked about the brand possibly doing footwear for baseball, football, tennis and "other sports where we can apply the same excellence, same style." He said the brand would partner with athletes in other sports and "look to expand the brand into other sports."
He added that apparel alone represented a huge horizon for the brand. As Jordan leaves the court, Miller said, the product line will follow him.
"It's been designed and developed for high performance on the basketball court [in the past]," Miller said. "And it's been footwear-focused up to this point. Some apparel. That for us provides a major opportunity as we move forward."
Miller stressed Nike would launch more Jordan apparel, showing Jordan's name, rather than simply the jumpman logo.