Nike Inc. (Beaverton, Ore.) has reportedly announced that it will pull its products from Sears department stores in a move that effectively blocks discount retailer Kmart, Sears’ new partner, from carrying the famous “swoosh” brand.
Analysts saw Nike’s move as an attempt to protect its high-end image as Kmart starts selling well-known Sears brands, although the world’s biggest athletic shoe maker did not comment on the Sears-Kmart deal.
Nike’s decision comes as it moves to capitalize on growing demand for premium-priced shoes like the Nike Shox, which have fueled recent profits and are typically sold at premium retailers.
“As of October 2005, Nike will no longer be selling product to Sears,” Nike said in a statement responding to questions from Reuters News Service. “This was a brand decision following a routine account review and the recent expiration of Nike’s agreement with Sears.”
Sears said it planned to “continue talking to Nike” and noted that it still carries other brand-name athletic shoes, including New Balance, Reebok, Adidas and Skechers. “Sears has a long-standing relationship with Nike,” said a Sears spokesperson. “We were surprised and, although we were disappointed, we respect their brand decision.”
Nike declined to say whether it would pull its products from other mid-priced chains, such as Kohl’s, or whether the move was purely a strategic change aimed solely at Sears. The athletic apparel marketer also declined to say whether it was in talks to bring its lower-priced Starter brand to Sears or Kmart, as it promotes those lower-priced shoes in Wal-Mart outlets. It also did not quantify how much its Sears sales were worth but said it was confident it would make up lost business elsewhere by capitalizing on its leading position in the marquee footwear category. It has said, however, that its higher-priced shoe sales grew 10 percent the past quarter.
“Sears has always prided itself on having name-brand athletic footwear including Nike, New Balance and Adidas,” an analyst told MSNBC. “Clearly this hurts them. Maybe this is Nike saying, ‘I don’t trust (Sears chairman) Edward Lampert, and I don’t know where the stores are going, so it’s not worth taking the risk of damaging the brand image.’ ”
Sears recently began putting its exclusive Kenmore appliances and Craftsman tools in a handful of Kmart stores. Bringing those brand names to the discount stores was part of the rationale for Kmart’s purchase of Sears in March.
“If your image is upscale and you end up in Kmart, then you do look like a loser,” said Erik Gordon, a marketing professor at Johns Hopkins University. “It can really destroy your brand.”
Other Sears suppliers that do not sell to Kmart include Liz Claiborne, Jones Apparel Group Apparel Group (Easy Spirit, Enzo Angiolini, Bandolino, Gloria Vanderbilt, Anne Klein, Joan & David, Gloria Vanderbilt, l.e.i.), and Timberland Co.. Timberland and Liz Claiborne have declined to comment on whether they would sell to Kmart.