Reebok Tries To Rebound But So Far, Nike Maintains Its Lead In Intense Shoe Wars

This was supposed to be Reebok’s year.

Not long ago chairman Paul Fireman was predicting that in 1995 Reebok would nuke Nike and reclaim the title of the world’s premier athletic footwear company.

It isn’t working out that way.

While Nike Inc. is in full stride, Reebok International Ltd. of Stoughton, Mass. appears to be plodding along, seemingly as out of sorts as Michael Jordan in a baseball uniform.

Fireman’s prediction was based on a bold plan: Reebok would aggressively expand beyond the womens’ shoe styles that first made it successful and go head to head with Nike in the market for a wide range of shoes. But the plan has proved harder and more expensive to execute than expected.

Nike, meanwhile, has raided Reebok’s turf, aggressively - and successfully - going after the women’s market.

As if that weren’t enough to worry about, Reebok finds itself with an organization and cost structure put in place during its decidedly nonlean and nonmean ‘80s.

Fireman has responded with $60 million in spending cuts and layoffs of 200 employees. Some Wall Street analysts expect more layoffs later this year.

Top management has been in flux. With the recent departure of three senior executives, t appears that Fireman himself will try to pull Reebok out of its funk.

To be sure, Reebok remains a strong company, posting $3.3 billion in sales last year and net income of $254 million.

And given the cyclical nature of the athletic footwear business, a turnaround is eminently possible. As recently as 15 months ago, Nike had a disappointing spring; now it booms.

Fireman declined a request for an interview, but Reebok made available the text of a speech he recently gave to investors.

“For the past three years,” he said, “Reebok has been focused on a sweeping mission - to transform and strengthen our brand by grounding it in sports.”

The sweeping mission has yet to yield sweeping results.

Reebok stock muddles along, stuck near its 52-week average of about $36 a share. Nike, in contrast, soars. A year ago, Nike traded at about $60 a share. Today, shares hover near $85.

“Right now, Nike is the Microsoft of the athletic footwear industry,” says an industry insider.

“Nike’s product in the last two years has been outstanding,” adds John Horan, publisher of the trade journal Sporting Goods Intelligence.

“And the numbers tell you that Reebok hasn’t been able to keep pace.”

In 1980s, Reebok capitalized on the women’s aerobics movement. The shoes, often designed as a hybrid between a dance slipper and a man’s athletic shoe, were a hot product in one of the hottest spots in the athletic shoe market.

For its part, Nike was targeting men and boys. While many Reebok wearers were glued to Jane Fonda exercise videos, Nike customers adored the young Michael Jordan.

But entering the 1990s, the market began to change.

An industry accustomed to reporting annual growth of 15 and 20 percent suddenly began to experience smaller gains and even declines, according to the Athletic Footwear Association.

In 1994, U.S. retail sales for athletic footwear were up a “modest” 3 percent to $12.4 billion, says the NPD Group of New York, a research tracking organization.

This changing market seemed to force more direct competition.

“1992 was the line in the sand,” says Peter Moore, a Reebok senior vice president. “That was when we decided we needed to fight our friends from Beaverton, Ore., with both hands.”

For the first time, Reebok offered shoes for soccer, baseball and football. It also upped production of basketball sneakers.

To push its new lines of sports shoes, Reebok signed a slew of endorsement contracts. Basketball’s Rebecca Lobo and Shaquille O’Neal, baseball’s Frank Thomas and tennis player Michael Chang all are on the new Reebok team.

Meanwhile, Nike was also moving in new directions.

When Ryka Inc.’s Sheri Poe first went out on the road to promote her athletic shoes for women, Nike was nowhere in evidence. Now Nike booths can be spotted at dance conferences.

“In the last three years, Nike has had a huge impact on the woman’s footwear market,” Poe says.

In 1994, Nike had a 21.7 percent share of the women’s market compared with Reebok’s 23.4 percent share, according to NPD.

“Nike’s women’s shoes have been on fire,” says Faye Landes, an analyst with Smith, Barney in New York.

In the men’s market last year, Nike’s share was 32.6 percent compared to Reebok’s 18.4 percent. NPD declined to provide figures for previous years.

Reebok’s push into the men’s market encountered more gender resistance than Nike’s into women’s footwear. Landes compares it to Ivy League colleges going coed.

“It was easier for a girl to wear a Princeton T-shirt than it was for a guy to wear a Vassar T-shirt,” she says.

That problem has been solved, she believes.

But others remain.

“So far Reebok has not moved as successfully into the men’s performance market as Nike has moved into the women’s performance area,” says John Shapiro, managing director of Chieftain Capital Management Inc. in New York.

At Sporting Goods Intelligence, Horan cites a basic problem.

“Their line is not as good,” he says of Reebok. “They have not made the same technical progress as Nike. Nike has the advantage of building on years of coherent technology” with its Air - as in Air Jordan - line of shoes.

While Nike stayed consistent, Reebok experimented with both shoe lines and marketing campaigns.

As Reebok’s Moore sees it, his company’s transition is much harder than Nike’s. Nike is simply moving into new categories, but Reebok is trying to change its whole image.

Some analysts think Reebok’s strategy will pay off next year with tieins pegged to the Olympic Games.

According to Thomas Berg of Shelby, Cullom & Davis, Reebok has spent $500 million in the last three years in developing and marketing new product lines.

“At the ‘92 Olympics, only 200 athletes wore Reeboks,” he says. “In ‘96, more than 3,000 athletes will wear Reeboks.”