It's fitting, for the purposes of this article anyway, that His Airness Michael Jordan finished out the final game of his astonishing career last night against the Philadelphia 76ers.
Jordan, who represents everything Nike (NYSE:NKE), scored 15 points in the Wizards' loss, while 76er bad boy Allen Iverson, with a lifetime Reebok (NYSE:RBK) endorsement deal, put 35 up on the board.
It's also fitting that LeBron James, perhaps the most hyped high school basketball player ever, will play what is likely his final game as an amateur tonight at Washington's MCI Center in the Jordan Capital Classic, sponsored by Nike's Jordan line. Both Nike and Reebok are vying hard for the teenage sensation's multimillion-dollar shoe endorsement contract -- once he actually makes it official that he's going pro instead of going to college, that is.
It's Nike versus Reebok all over again.
Not only are Nike and Reebok battling one another for James' mug and name, but they're at it again in the athletic shoe and apparel marketplace. Reebok, which some left for dead just a few short years ago, has made a stunning comeback. Not content to be just another L.A. Gear-type 1980s casualty, the company has transitioned into a real competitor again for Nike.
As a Nike shareholder over the last five years, I'd noticed Reebok's troubles: the stagnating and declining sales, the loss of market share, and moreover, the plain and simple loss of their mojo. Reebok went from '80s chic to '90s geek in no time flat.
I say that not as a Nike shareholder, per se, but as an avid sneaker freak. I own more pairs of Adidas than anything else, so clearly I'm not wed to Nike. But, dang, something just happened to Reebok in the 1990s. The shoes got ugly, the brand became terribly uncool, and its former customers went elsewhere for their kicks.
What went wrong?
Reebok's stumble involved naming the man responsible for its 1980s success, Chief Executive Officer Paul Fireman, chairman in 1987. Fireman left the day-to-day operations of the business in the hands of a new CEO, and Nike left Reebok behind.
Americans' attentions were turning more from fitness, which had been Reebok's strong suit, to sports. And Nike, with its basketball legacy shaping up in the form of one man and one shoe (Jordan and the Air Jordan), trounced Reebok. Remember The Pump -- Reebok's sort-of answer to Nike Air? Right then and there, someone at Reebok should have alerted Fireman that it was time to come on back downstairs and start making some everyday decisions for the company he fostered and grew.
Fireman did eventually take back control at Reebok, but not until November 1999. By then, the company's sales were down consistently, and its stock eventually bottomed out below $7.
Never afraid of a good fight, he picked an interesting moment to reenter as Reebok's chief, too. All of the athletic shoe industry was dealing with the dreaded "brown shoe" fad at the time. People were skipping the traditional pricey, flashy sneakers in favor of lower-key brown leather casual shoes, and the market was feeling it.
Still, Fireman began slowly rebuilding Reebok, its brand, and its reputation as a quality athletic footwear manufacturer. Here we are a little more than three years later, and Reebok's a company to be reckoned with again.
Reebok's reasons for success
Several things have contributed to Reebok's comeback. First, the shoes simply look better. They're stylish once again, and eye-catching, without being ostentatious.
Next, Nike's infamous dustup with its largest distributor, Foot Locker (NYSE:FL), in February of last year left a big gaping hole for someone to fill, and Reebok's done it. Foot Locker told Nike it wanted to cut in half the space it devoted to Nike's "marquee" shoes (those priced above $100). Foot Locker customers wanted a bigger selection of lower-priced shoes, according to the retailer.
Reebok, with an expanding presence in basketball shoes, is now using some of its rival's former space to sell its Iverson-branded shoes, as well as its Above the Rim collection. Reebok expects to grab even more Foot Locker shelf space in the future.
Another factor helping Reebok has been its focus on its street-worthy Rbk line, introduced last year. Rbk is geared toward urban youth and so-called "ballers," or street basketball players. The Iverson shoes fall under this brand, as does the new line of sneakers designed and endorsed by rapper Jay-Z. (Known to his mama as "Shawn Carter.")
Reebok's done a solid job so far at drawing out the connections between hip-hop music and basketball, and the increasing popularity of the Rbk brand reflects that. Signing a rapper to a shoe endorsement is an industry first, and something you can't imagine Nike doing, but it's a brave move. The company will have to be careful about "keeping it real," though. Ballers don't only want to look good -- they want quality shoes, too. So far, Reebok's delivering the goods on both fronts.
The general trend of "old school" popularity across the shoe industry is also helping Reebok in a big way. In the past several years, customers have demanded the revival of retro, or classic, athletic shoes. They're usually shoe designs that have been around for decades, and they're not as flashy or expensive as a pair of top-of-the-line basketball shoes. According to the Sporting Goods Manufacturers Association, sales of these retro styles rose 11.4% in 2002.
Reebok has a Classic division, selling some of the company's oldest and simplest designs to great acclaim. Reebok signed hip-shaking Colombian pop-tart Shakira to promote its Classic line, and also uses rappers Eve and Fabolous (no, that's not a typo) for the line's advertisements. Some of the ads show the stars and the shoes in Foot Locker, further connecting Reebok and Foot Locker.
Additionally, Reebok has two key licensing deals with the National Football League and the National Basketball Association that should strengthen its market position in the coming years. The Reebok Vector will be the logo of choice on football and basketball uniforms and assorted merchandise and equipment over the next 10 years -- spots where little Nike Swooshes used to reside. Score some very big points for Reebok here.
Reebok's still gotta catch Nike.
None of this is to say that Reebok's going to bury Nike tomorrow. Nike commands 39.1% of the U.S. athletic shoe market to Reebok's 12%, according to trade publication Sporting Goods Intelligence. Reebok, though, is priming for more success, while Nike's still struggling to replace all the distribution points it lost following Foot Locker's self-imposed partial removal.
Reebok has bounced back into the athletic footwear and apparel scene, as sprightly as a young and eager rookie. A combination of several fortuitous events and trends, along with better-designed shoes, have mixed with Paul Fireman's excellent leadership to revive an old brand like new. It's enough to make even Terry Tate, Office Linebacker, proud.
Now that you know how and why Reebok's staged such an impressive rebound, come back in two weeks when I'll stack Reebok and Nike up next to each other, numbers-wise. Which company is the strongest, financially? How much do Reebok's bottom line and free cash flow benefit from its recently reclaimed success? Don't miss it. The race is only heating up.
As mentioned above, LouAnn Lofton owns shares of Nike. The Motley Fool is investors writing for investors .
