How Big Can Nike’s Women’s Business Be?

One of the key growth strategies outlined by sports giant Nike (NYSE:NKE) to achieve its stated target of $36 billion in annual revenues by fiscal 2017 is growing its women’s business. To this end, the company appointed long time company executive Amy Montagne as the head of its women’s business in 2013. Nike’s women’s business grew by nearly 12% to $5 billion in 2013, outpacing the company’s overall 9% top line growth. ^[1] The company sees enough opportunity in this market to grow revenues from the segment to above $7 billion by fiscal 2017, which would represent ~20% of its overall total revenues. ^[2]

Nike is not alone in seeing women’s athletics as a key source of growth for its business: women’s athletics is seen as an important driver of revenue growth for a number of athletic brands including Adidas, Under Armour, and Lululemon. Nike is taking those businesses head-on by introducing a number of products that compete for the same customers that Under Armour and Lululemon products also target. Nike’s Legend Tights pose a challenge to Lululemon, a company whose core product is tights. Meanwhile, both Nike and Under Armour have pushed their own lines in a bid to capture more of the yoga and training market.

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Women’s Sports Market

Currently, most sports apparel companies derive most of their revenues from the men’s business. For example, Nike’s women’s business only contributed 18% to the top line in fiscal 2014. Despite this, apparel producers are targeting more revenues from the women’s business, based on the belief that figures for sports participation by women are not accurately reflected in sales figures. This confidence is supported by some studies while others oppose it. Although studies vary in their exact tallies, most agree that boys and girls participate about equally in sports activities while in school. According to one study done by the Women’s Sports Foundation in 2011, more boys participate in sports activities in urban areas than girls. Between 3rd and 5th grade students, 80% of boys in urban areas participated in sports compared to only 59% of girls. In suburban and rural areas, however, the difference is much smaller, with 81% of girls participating compared to 89% of boys, while 69% of girls participate compared to 73% of boys in rural areas. In aggregate, between 3rd grade and 12th grade, 8 million girls participate in sports activities compared to 12 million boys. ^[3] That sort of split between female and male participants has led Under Armour to believe that it can make equal revenue from its men’s and women’s divisions. Currently, Under Armour brings in about $1 billion annually from the men’s business and $500 million from women’s apparel. Nike’s split is even more tilted towards the men’s business, generating $14 billion in men’s sales last year compared to only $5 billion in women’s.

However, there are other studies that, instead of corroborating the above cited evidence, show a wider gap in sports participation between the genders. One such study done by the U.S. Bureau of Labor Statistics concluded that on average men spend twice as much time per day on exercise and sports than women. In addition, more men participate in exercise and sports. ^[4] If those statistics are more reflective of the population as a whole, then an overzealous push for women’s sales could result in a sales stall-out before any revenue goals are achieved. However, even if the BLS study turns out to be more accurate, there would still be an enormous opportunity in youth sales.

Strategy Options

Nike has historically based its business by associating itself with a sport chosen specifically for its reach and popularity in specific geographies. For example, the company initially started out as a manufacturer and distributor of basketball apparel and shoes in the U.S., and branched out by capturing incremental segments in other sports. In Europe, Nike based its business around soccer and gradually grew large enough to become the preferred sporting brand in the 10 most important cities for the sports gear business in the continent. The strategy for the women’s business should be the same. Nike can take some notes from Lululemon for successfully spotting yoga as one of the fastest-growing activities in the U.S., with a largely female participant base. The company associated itself with the activity by offering several apps that allowed people to find not only yoga centers but also like-minded people interested in the same activities. It then promoted those activities and sold its products to the target audience created.  In the calendar year 2013, Lululemon made $1.6 billion in revenues. Since, the company derives most of its revenues from the sale of yoga pants to women with an average price of $80, we can assume that the company sold 20 million yoga pants. With the added assumption that each customer bought four yoga pants, we arrive at a figure of 5 million customers, or roughly 9% of the female population aged 18-44. Nike can pursue a similar path and achieve similar revenues by targeting running.

Alternatively, the company can look at competitor Adidas’ work in China. Adidas recognized that voluntary participation in sports in China is not comparable to that in Europe and North America. Instead of seeing sports as something serious enough to build a lifestyle around, Chinese consumers mostly see it as a recreational activity. The company used this insight and ran its extremely well-received #allinformygirls campaign centered around women doing fun things in Adidas gear. ^[5]. Given the nascency of the sports apparel market in China, Nike can catch up with Adidas by forming strategic alliances with distributors and producers, as well as grass root organizations that help promote such activities in the region.

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1. NIKE’s CEO discusses F4Q2014 Results, Seeking Alpha, June 2014 [↩]
2. NIKE’s CEO discusses F4Q2014 Results, Seeking Alpha, June 2014 [↩]
3. PROGRESS WITHOUT EQUITY: The Provision of High School Athletic Opportunity in the United States, by Gender 1993-94 through 2005-06, Women’s Sports Foundation, November 2011 [↩]
4. AMERICANTIMEUSESURVEY—2013RESULTS, BLS, June 2014 [↩]
5. Allinformygirls search results, Twitter, August 2014 [↩]