Nike’s moral arc bends toward sneakers

Has Nike decided to follow the example of Colin Kaepernick, the controversial NFL quarterback, and “believe in something, even if it means sacrificing everything,” as he puts it? Or has the company calculated that generating some buzz would help reinvigorate a brand that was at risk of losing its spark?
Nike has struggled to generate excitement around new products and has seen sales drop in three of the past four quarters. A 4% sales increase in the most recent quarter and investor optimism that the iconic brand would return to solid growth has driven up the shares this year. But Nike’s rebound is still tenuous, especially given the momentum behind rivals such as Lululemon and Adidas . It has been at risk of falling down the path of Under Armour , which lost its momentum as consumers gravitated elsewhere.

Grabbing attention by generating controversy may prove a smart move for Nike. “The opposite of love isn’t hate. It’s indifference,” says Thomas Ordahl, chief strategy officer at Landor, a brand consulting firm. “That’s kind of where they are. They’ve had cultural relevance, but that’s their biggest risk-not being relevant, fading into obscurity by being neutrally palatable.”

Nike clearly knew the ad campaign could hurt its stock and draw criticism from the president. It did. But the decision is a sign that executives felt compelled to do something big. “They have to stay in the cultural conversation, which means being divisive,” Mr. Ordahl said. “Staying on the sidelines isn’t going to advance their cause.”

The bigger risk for Nike was failing to meet expectations. Investors have given Nike the benefit of the doubt because it is Nike, assuming that its genius marketers would eventually pull something out of the hat. They were right.

Even if the controversy over the ads grows, Nike’s risk is limited. The company may lose some of its older, white customers who ruined their sneakers and socks by cutting out logos, but it is right to bet that younger, more progressive buyers are its future. Nike will also remain one of the NFL’s biggest business partners, with a billion-dollar apparel deal as the league’s official uniform maker. The campaign has the added benefit of neatly pasting over unpleasant #MeToo allegations at the company.

If, in the worst-case scenario, the shares slide further, investors can buy the stock on the selloff and wait for the controversy to subside. As the news cycle produces something new to fume about, it inevitably will.