Why a Nike Sneaker Falling Apart on-Court Won’t Hurt the Brand

For Nike Inc., the cost of an embarrassing on-court moment is likely to amount to nothing more than a drop in the bucket — or a split in the sneaker seam.

The brand saw its stock shed around 1 to 2 percent Thursday on heels of the viral moment when Duke Blue Devils basketball star Zion Williamson’s Nike PG 2.5 shoe split in half about 30 seconds into a game against the North Carolina Tar Heels.

But the firm’s shares quickly reversed those modest losses today and remained in the green about 1 percent this afternoon, lending credence to the argument that the global behemoth could readily withstand major and minor public hiccups.

While Nike is certainly not damage-proof, a major reason the brand could shoulder public firestorms is that many such social media-born moments are hardly epic (even if they appear that way on the internet).

“This kind of situation [where a sneaker malfunctions] is not uncommon,” explained Matt Powell, The NPD Group Inc.’s senior sports industry analyst. “There have been instances over the years when a shoe [simply] failed — in similar kinds of circumstances. This is one shoe, and Nike makes hundreds of millions of pairs of shoes. Even if the whole line failed — and that’s happened before — things happen in manufacturing. Not every product performs like it’s expected to.”

Still, Powell added, “with social media being what it is,” a fairly innocuous event can quickly gain steam. At the same time, if there is a lack of evidence to back up the event’s significance, the smoke could be likely to subside more quickly — especially if the brand makes the right public relations steps after, Powell noted.

“[Nike] said they’re going to investigate why this shoe broke,” he added. “They should reveal [those findings] to the public and issue some statement that they tested other PG 2.5 [shoes] and determined that they’re not in jeopardy [which I think they’ll find], then move on.”

In the meantime, Powell said the $37 billion brand — whose market cap sits at around $132 billion — hardly needs to lose sleep over a single ill-performing shoe. It has dozens of other categories and strengths to offset areas of weakness. (Even at the height of its so-called #MeToo moment last year, when 10 or so executives exited the brand amid claims of a “boys club” culture, data showed Nike’s sales and public perception did not materially wane.)

“Because they’re so massive — and they have scale — they can do anything they want,” he noted. “Diversity [of product and categories], as well as size, really protects them.”

It also doesn’t hurt that the basketball category made up less than 5 percent of the overall athletic shoe market in 2018, per NPD data, and has been steadily losing steam in recent years. Basketball shoe sales were down high single digits last year, NPD found.

“If basketball was growing at, say, 20 percent and we were really counting on that category to get our numbers, maybe this event could nick that a little bit [but probably not],” Powell said. “But the mere fact that basketball is a marginal category at this point [lets us know] that even if this event trashes the basketball business — which it’s not going to do — it’s relatively inconsequential to the industry.”

And so Nike lives another day.

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