In 1990, Nike surpassed Reebok in footwear sales. In the year ending in August 1995, Nike had $4.7 billion in sales compared to Reebok’s $3.37 billion. One of the largest battlegrounds was the retail Foot Locker stores owned by Woolworth Corp. The 2,800 retail stores sell 23 percent of U.S. sport shoes, representing $1.5 billion of the $6.5 billion U.S. market for athletic shoes. Sales at Foot Locker stores account for almost 60 percent of the 1$ billion U.S. sales gap between Reebok and Nike.
Insiders note that the problems between Reebok and Foot Locker go back to the days when Reebok shoes were selling rapidly. Foot Locker wanted concessions on price and wanted Reebok to make some styles exclusively for them. Reebok was busy selling to other outlets and was unwilling or unable to alter its production and distribution systems. Nike was eager to build custom products for Foot Locker and
3
offered a dozen products exclusively at the chain. Ex-employees at Reebok note that the company had additional problems providing samples and design plans to Foot Locker, claiming that “Sometimes the samples would come in late and sometimes not at all—which got Foot Locker mad. . . . Sometimes, fashions last less than six weeks; if you don’t get it in right then, there goes a major sale.”
Mr. Fireman responded by trying to improve relations with Foot Locker. He also offered to begin building exclusive styles for Foot Locker, but the introduction of the products was uncertain. He also noted that Reebok was working hard to cut costs and improve its order and information tracking system. One problem that remained was that the clerks at Foot Locker stores tended to push the Nike brands harder.
By September of 1995, major shareholders were getting upset with Reebok management. One of the leading outsider shareholders, Glenn Greenberg of Chieftain Capital Management, noted “The major shareholders have no confidence in the management of this company. If it was up to us, they would have changed horses or sold the company a long time ago.”