Nike’s Problem: Young People

Nike Inc. (NYSE: NKE) has discovered that people don’t want its golf equipment, maybe because young people who don’t want to spend five hours on a course have never adopted it. Tiger Woods, its most visible endorser, has not played in two years. Michael Jordan, Nike’s most important spokesman, is 53 years old. Nike is running low on symbols of its sportswear dominance.

Nike depends more on Jordan than Woods. Jordan’s brand brings in $2.7 billion a year. However, as he approaches 60, Jordan’s relevance will start to disappear.

Rival Under Armour Inc. (NYSE: UA) is not nearly as large as Nike, but it is gaining. Under Armour had $1 billion in revenue last quarter, up 28%. It should not be doing well at all in a world in which Nike has dominated for decades, holding off Reebok, Adidas, New Balance and a number of other sports fashion rivals.

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Nike specifically calls itself a growth company. It had revenue of $8.2 billion in its most recent quarter, up 9%. Per-share earnings were flat at $0.49. While both numbers were impressive, neither would put Nike much into the growth category. Wall Street was not convinced. Nike’s shares are down 12% this year to about $54.

The Nike brand is all over the Olympics, an event that may fail almost completely. The company still has an army of endorsers across all its product lines, but none as famous as Jordan, or probably Woods.

A company for which the largest endorsement pillar is well over five decades old is a company with a big challenge, particularly since its products appear to be aimed at people much younger.

Young people will inherit the earth, especially when it comes to athletic shoes. Golf equipment has been a failure for Nike, but that’s not nearly as important as its overall product.

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