Nike: Putting ROIC Before Ego

Nike but ego aside and made the right ROIC decision by getting out of the competitive swim business – but not without inflicting as much bodily harm as possible on its opponent.
I was initially shocked to see this one… After taking a blow during the summer Olympics by having to allow Nike swim athletes to wear Speedo suits, Nike s getting out of the competitive swim business.

Nike is finally seeing the light… After sustaining such a loss (in PR or in $$), the old Nike would have plowed capital into this business just for the sake of winning. That’s what they’ve always done. But an important point here is that Nike is getting out of ‘competitive’ swim – not ‘casual’ swim. For what it’s worth, 98% of swim-related sales come from the casual market. This is business that Nike licenses out to Perry Ellis. NKE brass asked themselves whether investing capital in this business would result in any boost in its casual business – and the answer is No. All in all, a wise move in my opinion. I’d rather see the capital go toward getting sport culture apparel right, or combating Under Armour in performance footwear. Apparently Nike Agrees.

One factor that really surprised me was that Nike was gunning for Michael Phelps. But something between the Olympics and now squashed chances of bringing him on. Could it be the sheer price, as nearly every endorser in the US has gunned for a piece of the MP enterprise?

To quote a sports agent representing most Nike swimmers (and most of his paycheck) "Nike getting out of the championship swimming market is the death of American elite swimming as we know it."

My view here is that Nike bid up Phelps just enough for Speedo (Warnaco) to keep him, but at a borderline painful price. In instances where Nike does not win, it inflicts as much bodily harm as possible.

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