The reality of Irving’s import to Nike: ‘They can let him go’

Nike faces plenty of challenges this year.

An abundance of sneakers and sportswear have build up in recent months, leading to concerns that Nike will have to cut prices sharply on shoes and sportswear if it wants to sell them during the competitive holiday season. This has taken a toll on the stock, which has fallen 41 percent in the past year.

Then on Thursday, one of the superstar athletes that Nike partners with, Kyrie Irving, was suspended of the Nets after he posted a link to an anti-Semitic movie on social media.

A day later, Nike suspended its relationship with the basketball star and said it would not release Mr. Irving’s new shoe, the Kyrie 8, which was due to hit the market on Tuesday. Nike has produced the shoe since 2014. The company does not state exactly how much revenue Mr. Irving’s shoes bring in, but that’s only a fraction of what the company earns from its ties to other notable stars, most notably basketball great Michael Jordan.

“There are some things that are out of Nike’s control,” like the supply chain and purchasing issues, that are not so easy to fix, said David Swartz, an equity analyst at Morningstar. “This Kyrie Irving situation was in Nike’s control. They can drop him.”

Nike did not respond to an email seeking comment on the financial implications of the suspension or the future of Mr. Irving’s relationship with the company.

In his statement announced the suspension of the relationship with Mr. Irving said the company: “At Nike, we believe there is no place for hate speech and we condemn any form of anti-Semitism.” It went on to add: “We are deeply saddened and disappointed by the situation and its impact on everyone.”

It was the second time in recent weeks that a sportswear company found itself in the middle of a controversy involving a celebrity partner.

Last month, rapper and designer Kanye West, who now goes by Ye, did a number of anti-Semitic remarks and wore a shirt with a slogan associated with white supremacists. Several companies and brands, including Balenciaga and Creative Artists Agency, cut ties with the artist.

But Adidas, who took a little longer to sever his relationship with Ye, will suffer significant financial consequences. It had built an entire division within the company dedicated to manufacturing and selling Yeezy merchandise. The company said the move would cost it 250 million euros, or about $246 million, this year.

Unlike Adidas and Ye, Nike is unlikely to experience the same kind of financial impact from suspending its relationship with Mr. Irving, whose contract with the company expires in October 2023.

For Nike, the Jordan brand and its ties to Michael Jordan remain the gold standard. Last year, the Jordan brand — which includes sneakers and other sportswear — accounted for $5 billion of Nike’s $44.5 billion in total revenue.

Hoping to find the next Mr. Jordan, Nike has signed deals with several basketball stars, including Los Angeles Lakers superstar LeBron James, and Mr. Irving’s Nets teammate Kevin Durant.

Many early iterations of Mr. Irving’s sneakers have been popular with fans and colleagues basketball players.

On a December 2020 call with Wall Street analysts and investors, John Donahoe, Nike’s president and CEO, said, “This quarter’s basketball launches, including the LeBron 18 and Kyrie 7, have sold incredibly well.”

Using celebrities and athletes to sell products, or even design and develop them, is nothing new. For athletic giants such as Nike, Adidas and Under Armor, for decades it has been extremely lucrative to tie up with entertainment stars or top sports figures. But associating a brand with a celebrity or an athlete has always had its dangers, and in the age of social media, those risks are more and more apparent.

Brands “have always been concerned about this with celebrities,” said Barbara Kahn, a professor of marketing at the Wharton School at the University of Pennsylvania.

She said that in the past, companies relied on tying advertising campaigns more to the attributes of their products, or how those products would make customers feel.

“What you’re now seeing brands struggle with is what their brand values ​​are,” Ms. Kahn said. “It makes the branding decisions much more complicated.”

Nike has at times embraced divisive endorsements and polarizing ad campaigns. But Mr Irving’s anti-Semitic remarks appeared to make it a straightforward decision to suspend him. Kahn said. She added that it was a continuation of the diversity and equity values ​​that it has signaled to consumers since partnering with the former NFL quarterback Colin Kaepernick in 2018.

The situation involving Mr Irving started last month when he posted a link on social media to the film “Hebrews to Negroes: Wake Up Black America”, which is fueled by anti-Semitic tropes. Among its claims is that the Holocaust never happened.

When the Nets suspended Mr. Irving a week later said he was “unfit to be associated” with the team because he had since denied saying he held any anti-Semitic views.

Lakers superstar Mr. James told journalists that he believed what Mr. Irving had done “a lot of damage to a lot of people.”

On Thursday, after being suspended, Mr Irving apologized on his Instagram account. “To all Jewish families and communities hurt and affected by my post, I am deeply sorry for causing you pain and I apologize.” he said.

For Mr. Irving, who considers himself one sneakerheadmany of the shoes he collaborated on with Nike were personal, just like his “I love you mother” series of shoes.

But last year, Mr. Irving went after Nike and a version of his Kyrie 8 shoes, claiming that he was not involved in the design process and that the resulting footwear was “trash.”

“Nike plans to release it without me being okay no matter what I say,” Mr. Irving wrote at the time in a post on his Instagram. He added, “So I apologize in advance to all my sneaker heads and true followers.”

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