Nike (NYSE:NKE) is well-known for making deals with the world's best athletes, securing endorsements from the likes of Michael Jordan and Tiger Woods. Last week, one of its subsidiaries announced another blockbuster partnership. Exeter Brand Group, which is wholly owned by Nike, will team up with discount shoe retailer Payless ShoeSource (NYSE:PSS) to make Payless the exclusive retailer of the Tailwind collection, which consists of five styles of women's athletic shoes and sandals.
The partnership, promoted by U.S. women's soccer star Brandi Chastain and other leading athletes, began by putting the shoes in 400 stores. That will grow to 1,500 by July, and it should reach all 4,600 Payless locations by yea's end. The company will add gear for girls in July, and it's considering adding Tailwind products for men and boys as well.
I have to admit that when I first heard about the deal, I didn't think it would end up being good for either company. I wondered whether Nike's image as a first-class shoe and apparel company would be tarnished. I also doubted whether there would be a large audience of buyers at Payless willing to spend $34.99 on a running shoe or $19.99 on an athletic sandal. After all, the majority of women's shoes at its stores can be had for less than $20.
Nike would probably argue that launching the products through its subsidiary enables it to reach a new audience without tarnishing its image. Nike may also point out the success of its other subsidiaries, including Cole Haan and Nike Bauer Hockey, but I don't think this is the same thing. Cole Haan remains a premium shoe company; I saw a nice crocodile shoe there for the premium price of $1,200. Nike Bauer Hockey merely let Nike enter the hockey business on the strenth of Bauer's already respected brand.
We'll have to wait and see how the public reacts to this new partnership. In the end, I don't think it will hurt Nike's image too much, but I don't see it being a huge catalyst for the company's new growth strategy. And I'm not convinced Payless shoppers are going to be willing to pay semi-premium prices at a discount store.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article.
