When Mindy F. Grossman took the helm of Nike Inc.'s (NKE) apparel division three years ago, it was staggering along like a winded sprinter. The New York fashion veteran wasted no time whipping things into shape: slashing costs, consolidating global sourcing, and centralizing design. Her efforts have paid off. While sales at the core footwear business grew just 5.4%, to $5.9 billion, for the fiscal year ended in September, apparel sales climbed 11.7%, to $3.1 billion. Nike doesn't break out apparel earnings, but analysts figure they are growing at a double-digit pace. "We've made a lot of progress," says Grossman.
But this race isn't anywhere near done. With a host of collections set to hit stores next spring, Grossman, 46, wants to move the sneaker giant well beyond clothes for serious jocks and into the market for sporty street apparel. For now, she's particularly targeting women, many of whom are as likely to wear yoga pants as jeans or khakis when they head to the mall or the movies these days. By combining Nike's high-tech athletic materials with casual fashion, she hopes to gain an edge over other apparel makers in creating "must-have outfits." Says Grossman: "That's what we're aiming for."
So are a lot of other companies, ranging from Gap and Tommy Hilfiger (TOM) to traditional Nike rivals like Adidas. And while Nike has a strong brand in athletic apparel, getting it right in the faddish casual-wear market is notoriously difficult. "Fashion means you have a trend that could last a couple seasons," says Jeffrey Bliss, president of Javelin Group, a Virginia-based sports-marketing firm. That, Bliss adds, "is not really good for brand building."
Nike figures it has little choice. With sneaker sales flat in North America, the Beaverton (Ore.) company needs another way to boost sales and profits. Because the activewear market is so fragmented, Nike execs figure they can double apparel revenues to $6 billion in five years.
If anyone can pull it off, say industry watchers, it's Grossman. They credit her with rebuilding Polo Ralph Lauren Corp.'s (RL) jeans business in the 1990s by focusing on what people wanted, from fit and styling to price. By the time she left the company in 2000, Polo Jeans was generating $450 million a year in sales, up from virtually zero.
Despite her reputation, Grossman has had to prove herself amid Nike's male-dominated sports culture. At first, says a company insider, she faced considerable skepticism. But her success turning around the struggling apparel unit won her the "street cred" to push Nike into broader markets. Tellingly, Grossman works not in Beaverton, but in hometown New York City, where she can stay abreast of the latest trends.
Nike has long designed clothes for regular folk who aspire to become great athletes -- or at least look like them. Now, Grossman wants people to wear Nike clothes at the coffee shop, mall, and disco. To get there, she's looking beyond traditional sports for inspiration, drawing from what she calls the "sports cultures" that have grown up around such pursuits as ultimate Frisbee, in-line skating, and beach volleyball. Nike's Sun Tech line -- one of several due out next spring -- will combine trendy beach-inspired styles with Nike materials designed to keep people cool and dry.
To turn more women into customers, Nike last year opened a half-dozen NIKEgoddess boutiques in major U.S. cities. They carry a range of crossover apparel for women, typified by flared "slacker tights" that can be worn jogging or dancing, and the Altura Jacket, a sporty-looking trench coat.
Will Grossman make the Nike brand synonymous with casual fashion? Sneaker makers have tried and failed before. Adidas-Salomon, for example, has rolled out three sports fashion lines, the latest by Japanese designer Yohji Yamamoto. Despite positive reviews, none has sold well. Then again, where Adidas farmed out the design process, Nike hired a seasoned fashion exec. The company is betting that Grossman's business sense and fashion instincts will help it sprint into the fashion arena. By Stanley Holmes in Beaverton, Ore.