Nike’s stock falls after Duke star is hurt as his sneaker comes apart

Posted at 7:06 PM, Feb 21, 2019

Nike is playing damage control after Duke basketball phenom Zion Williamson tore his sneaker in a game Wednesday evening.

Nike’s stock was down more than 1% on Thursday. Nike builds its reputation around creating premier shoes and clothes for athletes, but that image took a hit with Williamson’s sneaker snafu.

Analysts attributed the stock move to Williamson, the presumptive top pick in this year’s NBA draft and the hottest prospect since LeBron James entered the draft from high school more than a decade ago. Within the first minute of Duke’s blockbuster matchup against rival North Carolinaon Wednesday, one of Williamson’s Nike PG2.5 shoes split apart.

Williamson left the game with a knee injury. Former President Barack Obama was sitting courtside, and clips of Williamson breaking his shoe and Obama pointing to it immediately went viral.

Nike, which exclusively supplies Duke’s basketball team with uniforms, shoes and gear, quickly released a statement.

“The quality and performance of our products are of utmost importance,” the company said. “While this is an isolated occurrence, we are working to identify the issue.”

Endorsement deals with star athletes, including LeBron James and Serena Williams, and sponsorships with pro sports leagues and top college basketball and football teams are a crucial part of Nike’s growth strategy.

Nike spent $11.5 billion, nearly a third of its sales, on marketing and endorsement contracts last year. Nike and its Jordan brand sponsored 85 men’s and women’s basketball teams in last year’s annual NCAA tournament.

In its annual securities filing, Nike warned that “negative claims or publicity involving us” from key endorsers or sponsors can “seriously damage our reputation and brand image.” It added another risk: “Social media, which accelerates and potentially amplifies the scope of negative publicity, can increase the challenges of responding to negative claims.”

Still, analysts don’t predict the Williamson incident to damage Nike’s reputation in the long run. Nike’s products haven’t had any major malfunctions in the past, except for some NBA jerseys briefly ripping in 2017.

“This is embarrassing for Nike, but will have no material impact on the business,” said Matt Powell, analyst at NPD Group.

Nike has also reduced its dependence on high-top basketball sneakers for growth in recent years. It has instead focused on lightweight running and wear-to-work shoes.

Nike’s basketball sneaker sales fell last year as consumers move away from performance sneakers to more casual and comfortable shoes. “Basketball shoes are not in fashion,” Powell said. “Athleisure footwear is in style.”

Patrick Rishe, the sports business director at Washington University in St. Louis, called Williamson’s sneaker break a freak accident.

“Nike is a massive brand and has tremendous power,” he said. “If they’re smart, they’ll reach out to Zion and have him wear their shoes again.”

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