Market Watchers: Nike Right to Drop Armstrong

In the wake of doping allegations that have rocked the cycling world and offered a damning indictment of Lance Armstrong, Nike’s decision to publicly distance itself from its former spokesman is a wise one, analysts told Footwear News.

“It was without a doubt a smart decision. As far as sports brands, Nike is considered best in class,” said Marc Beckman, founder and CEO of Designers Management Agency, a New York-based talent and brand management firm. “I don’t think any affiliation with [Armstrong] will do any good for the brand. The whole story is just horrible.”

On Wednesday morning, hours after Armstrong announced he would step down as chairman of the Livestrong Foundation he created to support people affected with cancer, Nike announced it was severing ties with the embattled cyclist.

“Due to the seemingly insurmountable evidence that Lance Armstrong participated in doping and misled Nike for more than a decade, it is with great sadness that we have terminated our contract with him,” the company statement said. “Nike does not condone the use of illegal performance-enhancing drugs in any manner.” The firm also will rename the Lance Armstrong Fitness Center at its Beaverton, Ore., headquarters, a Nike spokesman confirmed.

Similarly, RadioShack and Budweiser — other Armstrong supporters — have ended or will end their relationships with the rider, the companies said on Wednesday.

The turning point in Armstrong’s reputation was a report issued last week by the U.S. Anti-Doping Agency, detailing its investigation into the seven-time Tour de France winner. Included were pages of testimony from former Armstrong teammates about the cycling star’s drug use and the prevalence of doping in the sport.

Armstrong, who has vehemently denied throughout his career that he used performance-enhancing drugs, hasn’t publicly commented on the allegations. But in August, he declined to continue fighting the USADA’s investigation.

“[These events are] slowly destroying the Lance Armstrong brand, and it would be damaging the Nike brand if they were to continue their relationship. I completely understand [Nike’s] desire to walk away,” Jim Gregory, CEO of branding firm CoreBrand, told FN.

Henry Schafer, EVP of The Q Scores Co., noted that the Armstrong brand has steadily taken hits from the doping allegations of the past.

“His consumer appeal is definitely tracking down and he’s below average in his positive perception and above average in negative perception,” Schafer said. “I’m not surprised Nike pulled away from him, [even though] they’re usually a staunch supporter [of their athletes]. It’s a no-win situation.”

Nike has run into trouble with its endorsers in the past, including Tiger Woods, Michael Vick and Joe Paterno. The athletic company stood by Woods after his cheating scandal surfaced, but eventually opted to rename its Joe Paterno Child Development Center following the Jerry Sandusky sexual abuse scandal at Penn State.

But Armstrong represents a special case for the athletic brand, Beckman said.

“The situation can be clearly distinguished from Joe Paterno and Woods. They weren’t doing anything to influence the outcome of a sport. I’m not downplaying the other issues, but in this case, Armstrong did something different — he cheated to advance in the sport,” he said. “Nike is going to have to create a visible separation from him publicly.”

Still, the turmoil around Armstrong won’t hurt Nike’s sales, according to Matt Powell, an analyst at SportsOneSource.

“I’m not seeing anything on the blogs that say the sneaker kid who’s really Nike’s primary customer is really concerned about this,” Powell said. “In the greater corporate world, maybe, but I don’t know that that translates to a loss of sales.”

And this won’t be the end of Livestrong.

In its statement, Nike said it would continue to support Livestrong initiatives, which include footwear, apparel and accessories branded with the Livestrong name.

Finish Line, a major retail partner of the collection, said in a statement to FN that it anticipates continued demand for the products.

“Finish Line continues to support the Livestrong Foundation and its commitment to the fight against cancer,” the statement said. “We are committed to providing products our customers want and expect from us. The current demand for Livestrong product remains high, and we will continue to deliver against the expectations of our customers.”

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