What better way to grow your business than by making it appeal to more of the population? Adding to its already impressive line-up, Nike (NYSE:NKE) announced that it was appointing a new head to its women's division. Longtime company executive Amy Montagne "will be responsible for expanding Nike's brand position with women and continuing to drive the current momentum within Nike's Women's business," according to a press release from the sports-apparel juggernaut In 2013, Nike's women's division increased revenue by 11%, outpacing the company's overall 9% revenue growth.
Women's athletics is seen as a main driver of revenue growth behind a number of athletic brands, including Nike, Under Armour (NYSE:UA), and lululemon athletica (NASDAQ:LULU). In Nike's fourth-quarter earnings call in June, Trevor Edwards, president of Nike Brand, said its "success in fiscal year '14 only hints at the enormous opportunity we see in the women's business and we are completely focused on capturing it."
Making the product fit the customer
Nike is moving to capture more of the women's market by focusing on categories that it knows women are interested in. In the earnings call, Nike called out the strength and potential of its Legend tights, Pro bras, and Dunk Sky Hi SneakerBoot . It's hard not to see direct challenges to Lululemon and Under Armour in that lineup.
Tights are Lululemon's core product, and both Nike and Under Armour have taken steps in the last year to capture more of the yoga and training market by pushing their own lines. Meanwhile, Under Armour has built a strong female athlete following on the success of its Armour Bra, which, along with compression shorts, the company sees as the lead products bringing women to its brand.
The market for women's sports
The push for more revenue from women is recognition on apparel producers' part that the figures for American sports participation might not be reflected in sales. While studies have varied in their exact tallies, the consensus is that, while in school, boys and girls participate in sports at fairly close levels. A 2007 study, for instance, found that, among youth aged 8 to 17, 69% of girls and 75% of boys took part in an organized sport.
That sort of split between female and male participants has led Under Armour to the belief that it can generate equal amounts of revenue from its men's and women's divisions. Right now, Under Armour brings in about $1 billion annually from men's gear and $500 million from women's apparel. Nike has an even more disparate split, generating $14 billion in men's sales last year and only $5 billion in women's -- putting the men's-to-women's ratio close to 3:1.
Nike believes it, too, can make huge gains in its women's division. Montagne has a background in merchandising at Nike. Given that new merchandising plans, developed under her watch as VP of global merchandising, have helped boost comparable sales by 22% in test stores, Montagne seems to be in a strong position to make more out of women's sales. . If it can recreate that magic with its women's product, it should have a long way to grow.
A potential roadblock
As always, there is a competing school of thought. While many studies show close participation rates in boys' and girls' athletics, especially during school years, others display a wider gap between the genders. For instance, according to the U.S. Bureau of Labor Statistics, the average man spends twice as much time each day on exercise and sports as the average woman. In addition, more men participate in exercise and sports.
If those statistics are more reflective of the population as a whole, then an attempt to push women's sales too hard could result in a sales stall out before major goals are achieved. Although there would still be opportunity in youth sales, which Nike is also excited about, women's sales might hit their limit sooner rather than later.
Organic growth is still possible
Of course, the numbers are subject to change, and if Lululemon has shown us anything, it's that a brand can promote an activity. Yoga has been one of the fastest-growing activities in the U.S., with a largely female participant base. Lululemon's success has helped that base grow, as more and more participants see the clothing as a source of pride and membership in a club, just like any fashion trend.
If Nike can recreate that for another sport -- running is an excellent opportunity -- then it might be able to push the U.S. participation rate toward the women's side, and increase its revenue at the same time. There's a ways to go, but if anyone can make it work, it's likely to be Nike -- you might remember it as the company that brought you "jogging."
Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Apple, Lululemon Athletica, Nike, and Under Armour. The Motley Fool owns shares of Apple, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.