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Asics Challenges Nike, Adidas With Lower-Priced Shoes

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Asics Challenges Nike, Adidas With Lower-Priced Shoes
Asics has mainly been selling shoes priced between $75 and $125, while Nike offers models for less, Toshiyuki Sano said. Photographer: Jin Lee/Bloomberg

Nov. 24 (Bloomberg) -- Asics Corp., targeting an almost doubling of sales in five years, plans to compete against Nike Inc. and Adidas AG by offering more lower-priced running shoes.

“We can’t expand by focusing on the medium-to-high end of the market anymore,” Toshiyuki Sano, an executive in charge of finance, said this week in an interview at Asics’ headquarters in Kobe, Japan. “We want to offer simpler entry-level models.”

The company, which gets 74 percent of its revenue from athletic shoes, announced last week it’s aiming for sales of 400 billion yen ($4.8 billion) for the end of fiscal 2015, up from 224 billion yen in the year ended March 31.

Sano said Asics will introduce more entry-level models with a recommended retail price of around $60. Asics, maker of the Onitsuka Tiger brand, has mainly been selling shoes priced between $75 and $125, while Nike offers models for less, he said.

“As long as they don’t go too far into the low-priced products, I think it’s a reasonable strategy,” said Nigel Muston, a Tokyo-based analyst at CLSA Asia-Pacific Markets who has rated Asics “underperform” since November 2008. “A lot of the consumer loyalty they’ve built up over the past five to 10 years should remain.”

The company’s target to almost double sales by 2015 is “fairly aggressive,” given the lack of details in the plan, Muston said.

‘Certain Functions’

“While we want to offer entry-level shoes, we want to keep the price around $60 so we can offer certain functions,” Sano, 56, said. “At the $50-range you can’t include some functions, and we are reluctant to go there. We wouldn’t go down to $30.”

The company’s lowest-priced shoe in the U.S., where Asics has about 13 percent of the running market, is the GEL-Maverick 3 for $50, according to its website. Shoes priced under $75 currently account for about 10 percent of Asics’ athletic-footwear sales, Sano said.

“We want to attract entry-level runners,” he said. “If that base grows, so will sales of our higher-level models.”

Asics, profitable on an annual basis over the past 10 years, on Nov. 4 forecast net income will rise 20 percent this year to 10 billion yen. It cut the target from a previous estimate of 11.5 billion yen because of the yen’s strength against other major currencies. Sales are expected to rise 5.6 percent to 237 billion yen.

Asics, which has flagship stores in New York and London, plans to open similar outlets in western Europe within the next five years, Sano said.

The company’s shares have risen 12 percent this year, compared with a 4.9 percent decline in Japan’s benchmark Nikkei 225 Stock Average. They fell 0.6 percent to 932 yen as of the close on the Tokyo Stock Exchange.

To contact the reporters on this story: Adam Le in Osaka at ale14@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Drew Gibson in Osaka at dgibson2@bloomberg.net.

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