Nike's Just Doing It, Thanks to Converse and China
Sometimes all it takes are a couple of strategic investments to keep a successful brand in the chips. In the case of Nike (NKE), a smart buy and a savvier expansion are paying off to the tune of 10 percent revenue growth with increases in every category. Revenues grew 9.9 percent to $4.84 billion, thanks in part to the Converse brand topping $1 billion this year to date and huge demand from China.
Back in 2003, Beaverton, Ore.-based Nike purchased Converse for the whopping sum of $305 million which left some analysts wondering if the athletic footwear powerhouse overpaid for a struggling brand with revenues $100 million less than the purchase price.
But the way Nike saw it, even though the brand lost a lot of the luster it had when it was the official footwear for the NBA, the 100+ year old Converse still had potential. Not to mention it had secured status as a favorite among alt-rock stars such as Kurt Cobain, wannabe hipsters and Chinese youth.
The latter was especially attractive to Nike which already controlled 42 percent of America's $18.3 billion athletic-shoe market and was eager to increase its own footprint in Asia. And by taking back Chinese distribution and tapping Converse' connection to indie music, Nike made another bet on the brand that is paying off.
China's indie bands may not have the same reach as their stateside counterparts, but counterculture multiplied by that many more people has significant potential. And by capturing the Chinese consumer with Converse, it's that much easier for Nike to sell its namesake brand.
2011 is already shaping up to be a very good year. Orders delivering through April of next year of Nike-brand apparel and footwear are up 11 percent. Guess where the goods are most in demand? Greater China - up 18 percent.
Well played, Nike.
Image via flickr user Alexandralee CC 2.0
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