Olympics will make year special, Nike says

Rumors spread this spring among Nike watchers that Charlie Denson might retire.

At that, Denson laughs. "What would I do?" the 52-year-old Nike-brand president asks.

"I mean, I go to the greatest sporting events in the world now. I get to know and meet all the greatest athletes in the world. If I retired, all I'd do is go to sporting events and spend time with athletes, anyway."

Denson has spent all but a few months of his working career with the sporting-goods giant, starting in 1979 as assistant manager of a Nike-owned store in Portland.

Recently, the brand has ridden high. Nike logged more than $18 billion in sales in its fiscal year ended May 31 and grabbed U.S. market share from rivals. Nike-endorsing athletes nabbed a majority of spots on the U.S. track and field Olympic team and 11 of 12 spots on the U.S. Olympic basketball squad.

Investors, though, worry the brand faces one of its toughest tests in the U.S. in years as the basketball-shoe market shrinks, casual-sports-apparel sales struggle, and consumer spending softens. Those worries drove the company's stock down $6.47, or 9.8 percent, to $59.50 June 26 — its largest loss in more than seven years. The stock closed at $58.17 Friday.

In a rare interview, which has been edited for space and clarity, Denson talked recently about burnishing Nike's basketball business via the Olympic team, fixing the company's apparel woes and the stock market's "overreaction."

Q: For the Olympics next month, Nike is sponsoring 22 of 28 Chinese sports federations. Why is that a better strategy than sponsoring the Olympics itself?

A: We get asked that question all the time. Part of the philosophy of the company, and really it's one of the foundations from which the company was actually birthed, is supporting the athlete. That's why we don't get involved in some of the event sponsorships. We try to leave that to the other people.

Q: You're opening more Nike-owned retail stores these days. Is merchandising more important today than in the past?

A: No question. Point-of-sale now is much more important for us as we continue to expand our own footprint at retail. We've always tried to supply the stores and left it to the retail partners to execute it at point-of-sale.

But today, you think about the Basketball USA team story, one of the things we've talked about a lot over the past year was an ignition point for our basketball business and what could it be.

I think to talk about what's going to happen in Beijing, the history of the U.S. basketball heritage coming into the Olympics, and the past several executions of that heritage, which have not been that good, we just think this year is special.

Q: Despite an impressive earnings report on June 25, investors recently drove Nike's stock down, reportedly on concerns about its marketing spending and flat future orders in the United States. Is Nike headed into another rough period?

A: I don't think so. We announced the move into sports-category organization (basketball, soccer and running, for example) about 1 1/2 years ago, and I couldn't be more excited about the future. I think we're doing all the right things right now. I think there was an overreaction to the earnings release to some degree. We're 75 to 80 percent of the way through the (reorganization), and we're still doing it while we're having record years as opposed to waiting until we get into a trough and having to do it.

The [recent] European soccer championships and the Beijing Olympics are two of the biggest events of the past two years and the next two years. We've said we feel great about our brand positions. We have the most innovative product being introduced, more so than in any single event in the history of the company.

Q: You spoke to Oregon State University business students not long ago and noted that the global apparel market is 10 times the size of the footwear market. But right now, Nike-brand apparel sales are just more than half its footwear sales, and in the U.S. its apparel sales increased only 2 percent last fiscal year. What's wrong with apparel here?

A: First of all, our apparel business continues to grow. It grew 14 percent [worldwide] this year. So we don't see it as going down at all. Our apparel business in the United States is in really good shape on the performance side, which is ultimately the most important piece of the business for us. Where we have to fix it right now in the United States, which again is a smaller piece of the entire portfolio, is around what we call sportswear and lifestyle. It's also the biggest opportunity. We've been treading water here for the past couple of years.

Q: You've essentially been brand president for seven years. Since Nike founder Phil Knight left the CEO post, he's put two other people — Bill Perez and Mark Parker — in that job. Is that a punch in the gut at all?

A: No, no. Like Phil does say sometimes publicly, Mark got the job with all the titles and the pictures, and Charlie got the best job. I don't disagree with him in that regard.

For me, growing up as part of the Nike brand my entire career and having the opportunity just to be president of the Nike brand is far beyond any expectations I had when I started.

And I would just say the relationship between Mark and me really didn't change that much. We still have a very complementary skill set. Now we have almost eight years of experience in complementing those skill sets.