Baton passes today at Nike

BEAVERTON, Ore. – Today, Beaverton-based Nike will get its first new chief executive since the company’s founding 40 years ago.

William Perez, formerly of Racine, Wisc.-based S.C. Johnson & Son Inc., is to replace co-founder Phil Knight. In his new job, Perez is faced with making Nike’s lesser-known subsidiary brands just as familiar as its signature swoosh.

The subsidiaries – in surf gear, designer dress shoes and discount apparel – are where much of the company’s future growth could lie.

The Nike-branded business, while still pulling in more than $10 billion in sales last year, probably won’t repeat the huge percentage leaps of past years.

But the subsidiaries, with little international exposure, are collectively turning in 30 percent, 40 percent, even 50 percent gains.

Knight believes the non-Nike brand subsidiaries could in five years provide as much as a quarter of the company’s annual sales. Although the company’s fortunes will continue to be driven by its Nike-branded products, less-familiar names – Cole Haan, Bauer Nike Hockey, Converse Inc., Hurley International and Exeter Brands Group – are also key to the company’s future.

Perez was tapped for his new job in part because of his experience in Wisconsin, where S.C. Johnson sells multiple products under multiple brand names all over the world, like Saran plastic wrap and Raid bug killer.

Nike largely sells only its swoosh-embossed product into its 125 or so national markets outside the United States, Knight said. Its subsidiaries sell limited amounts of their products, if any, overseas.

The five subsidiaries – along with Nike brand subsidiary Nike Golf – accounted for $1.4 billion, or about 11 percent, of Nike’s $12.3 billion in revenue for the 2004 fiscal year.

Nike also needs to diversify its risk, Jennifer Black, a research analyst and founder of Lake Oswego-based Jennifer Black & Associates, told The Oregonian.

Other apparel companies have had success supplementing their signature lines with other brands to increase sales, Black said, like Liz Claiborne Inc.’s Lucky Brand Dungarees and Juicy Couture.

Nike first branched out in 1988, when it purchased Yarmouth, Maine-based Cole Haan.

But Nike’s biggest acquisition came in 1995, when it spent a hefty $409 million to buy Canstar Sports, a Montreal-based maker of hockey skates and equipment.

Since 2002, Nike has made a series of acquisitions, picking up a company a year – Hurley International, Converse and this year Official Starter, now called Exeter Brands.

Analysts are most optimistic about these three companies, seeing vast opportunities for expanding the subsidiaries’ reach by applying Nike’s supply and distribution network, library of designs and technology and other Nike business methods.

Hurley gives Nike immediate access to surfing and skateboard consumers. Converse expands Nike’s reach, with sneakers that are less expensive than Nike’s premium performance shoes. And Starter, with its lower-priced merchandise, puts Nike in touch with the vast consumer base that shops at discount stores, such as Wal-Mart.

Rumors frequently circulate that Nike might buy Patagonia Inc., Burton Snowboards or Callaway Golf Co., although Nike routinely declines to comment on potential acquisitions.