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Saturday, April 17, 2021

Nike offers a grim reminder of what it was before Michael Jordan

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Just a year ago, Nike seemed invincible. Its share price had vaulted nearly 50 percent over the previous 12 months, compared with gains of 17 percent for the S&P 500 index.

Now things are looking pretty similar. In the two months since Nike announced it would no longer use the term “pro-athlete” to describe other athletes, its stock has fallen about 6 percent. And in the last week, the company has fallen from its perch atop the Fortune 500 to third.

News of the change is still drawing wide coverage. The Wall Street Journal asked for consumer reactions. But for Nike, the fallout has also injected a kind of déjà vu. The same fears that once saw the company’s stock collapse were again dominating the media and the town halls that determine future hiring and retirement plans for American businesses, the same fears that helped to lead to Nike’s crisis a year ago.

First, there was “The Biggest Threat,” a dramatic story in the Wall Street Journal that quoted an ex-Nike executive making a “nasty turn.” President Donald Trump lambasted it as “pure Fake News.”

“It’s like ISIS, ISIS kills anybody who won’t wear their uniforms,” Trump said. “Even if you’re an athlete they still try to kill you, it’s not even up to us. If you’re an athlete they’ll come and take you.”

The ex-Nike executive, Jeff Burbank, said the Nike brand needed to be focused on “the Nike man and woman.”

“That backfired,” he said. “When they went from Michael Jordan to becoming a conglomerate, it was not cool.”

Last week, an ex-Nike executive took to Facebook to complain about what he saw as a betrayal by the president. “I worked for Nike for 10 years in Oregon,” Scott Greiper wrote on Facebook. “The Left has taken over every level of the company, pushing their agenda to put their personal agendas before the company’s. All that Trump does is re-divert attention and divert money. … He will always have it, it will always be popular to hate on him. … Only the Nike man and woman stand on the principle.”

When a journalist from the Chicago Tribune tried to contact Greiper after the Facebook post, she was told he didn’t work for Nike.

Meanwhile, just like a year ago, there was a national debate over whether Trump was helping or hurting the sports industry.

“Companies are in the media business for a reason,” ESPN Radio host Colin Cowherd said. “The reason they’re in the media business is to be watched. They’re not going to go the way of CBS because they don’t like a president’s politics.”

A group called Athlete’s Ally has partnered with corporate leaders to publicly support “all athletes who may not feel comfortable in being out.”

Shortly after the change in Nike’s name, Bowman claimed on his blog that the sales slump could be linked to the company’s shift away from being, as he called it, “a sign-hanging pop culture icon.”

“Given the current political environment, Nike has lost some cachet, particularly in sports.”

But other former Nike employees, including Burbank, downplayed concerns about how the company might develop in the future. He pointed out that its sports-related products, such as the Flyknit, targeted younger, female consumers. And the high-margin sneakers and apparel that first buoyed the company, such as Michael Jordan’s Air Jordans, had turned to be a smaller part of its business.

Nike was able to withstand the dip in a similar fashion a year ago, buoyed by a balance of a sportswear company trying to rise above fashion and a basketball shoe manufacturer trying to catch up with basketball sneaker leaders.

But analysts warned that the energy of the rest of Nike’s business would fade if its basketball segment, which had been one of its fastest-growing segments, continued to stagnate.

“By next quarter it will be flat or down,” Michael Phelps, a retired NBA star, said on a conference call.

No one knew for sure if Nike was returning to fashion and stagnant basketball. Yet there was another sign of trouble in the basketball business: Nike was also once the king of selling basketball shoes to kids.

The product had gone stale.

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