(MONEY Magazine) – On the seventh floor of Saks Fifth Avenue's flagship New York City store, nestled between Dolce & Gabbana and Polo, are Nike soccer shirts. The sneaker giant, for the first time in its 33-year history, is taking its game off the court and into couture. Earlier this year, Nike began selling trench coats, halter tops and miniskirts at high-end retailers, and it plans to roll out a beachwear line for summer. Nike has long had a side business in athletic clothing, but recently, apparel and sporting equipment such as soccer balls have become more important. Revenue from nonfootwear items was 46% of sales in the first nine months of this fiscal year, up from 38% in 2000.

Chief financial officer Don Blair says Nike's expansion into clothing has made it less vulnerable to the boom and bust cycles in the sneaker business. (U.S. footwear revenue was down slightly for the first nine months of the fiscal year; clothing sales grew.) Analysts expect the company to earn $903 million in fiscal 2004, which ends May 31, up 24% from the year before (excluding charges). "We are building a portfolio of businesses that can grow over time with much less risk," says Blair.

The stock is up 54% in the past year. But a P/E of 19 (based on estimated 2004 earnings) isn't bad for a premium brand if the new mix of businesses produces consistent growth. "We like Nike's franchise, and we like the new product pipeline," says Zu Cowperthwaite, an analyst at Evergreen Investments. --STEPHEN GANDEL