Welcome back to SportsVerse, my twice-weekly newsletter that tells stories you can’t find anywhere else about the intersection of sports, fashion, business, and culture.
In 2024, Shai Gilgeous-Alexander (SGA), the two-time NBA MVP and star of the Oklahoma City Thunder, was announced as creative director of Converse’s basketball division, in a deal that elevated him as the cornerstone signature athlete at the Nike-owned brand. Elevating SGA, who had been affiliated with the brand since 2020, was part of Converse’s strategy to revive interest and excitement in its brand by leveraging the power of athlete endorsements, attempting to attract fresh eyes on its products by reentering the signature basketball footwear market.
On paper, it made a lot of sense. After all, Converse’s reputation as a manufacturer of cutting edge basketball footwear saw it dominate the professional game for much of the 20th century, thanks in part to the work of basketball player-turned-ambassador and salesman Chuck Taylor, whose name is still linked to the iconic canvas basketball silhouette that was once ubiquitous on the hardwood. Converse’s reputation was further bolstered by its relationship to the elite echelons of the sport, such as its role as the first ever footwear partner of the US Olympic basketball team in the 1930s. As Converse’s basketball sneakers were usurped in the latter 1900s by Adidas and then Nike (which would later acquire Converse in 2003, two years after it filed for bankruptcy), it transitioned into the retro lifestyle sneaker business we know it as today.
The bet that Converse made on SGA was its bid to benefit from the star power of the most spoken about and marketable man in the NBA (until Jalen Brunson’s heroics of the past month). Late Tuesday night, it emerged that the experiment had come to an end far sooner than anyone expected. Nike announced that Shai Gilgeous-Alexander was joining Nike’s roster of signature basketball athletes, ending his association with its subsidiary, Converse.
It was a shock move, given how recently SGA was elevated to his role as the face of Converse basketball, and given how the brand has no other genuine breakout stars to carry the torch in his absence. It was also surprising because Converse had been signing new athletes up to its basketball roster as recently as the end of last year, namely SGA’s cousin, Nickeil Alexander-Walker. But considering the wider context and the health of both Nike’s and Converse’s respective businesses, there are various explanations for the unconventional reshuffle.
Everyone who reads SportsVerse will need no introduction to the challenges that Nike is grappling with as it waits for its turnaround strategy under CEO Elliott Hill to take hold. Converse, meanwhile, has been experiencing plummeting sales for some time now, reporting double-digit revenue declines quarter after quarter after quarter, putting further unwanted pressure on Nike’s bottom line. In the most recent reported quarter Converse generated sales of $264 million, down 35 percent on a reported basis from $405 million at the same time last year. It constituted the brand’s worst quarter in 15 years. Nike reports full-year earnings next week (within which it will also report earnings for the Converse business) — it’s not expected to look pretty for either brand. Converse generated revenue of $1.7 billion in its last full financial year, a tiny but not insignificant portion of Nike’s total $46.3 billion from the same period.
Against this backdrop, there are three possible explanations for Nike’s decision to end the SGA project at Converse.
Converse needs life support. Flashy athlete endorsements like the erstwhile SGA partnership are all well and good when a brand can afford them, because more often than not these lines prove to be loss-making yet valuable marketing tools. This is a luxury that Nike couldn’t really justify right now for Converse.
We see this cycle repeat itself time and time again in the sportswear market: when a company is in trouble, the first things to go are all the nice-to-haves that the brand invested in building during more optimistic days gone by. The perfect examples are Under Armour’s shock divestment of Stephen Curry’s Curry Brand at the end of last year, and of course Nike’s removal of SGA from Converse.
A special edition colourway of the Shai 001.
Bringing an end to his signature line at Converse — which yielded the Shai 001 silhouette — could suggest that Nike no longer believes that investing so heavily in the signature sneaker market is a critical aspect of Converse’s turnaround plan. The performance basketball element always felt a little incongruous, given how minimal an impact Converse had on the overall market. Removing this significant commitment frees up both time and resources for the Converse team to focus its efforts on reviving brand heat and interest in its lifestyle footwear assortment (which has been out of favour in the mainstream for several years) and the iconic Chuck Taylor canvas silhouette.
One source I spoke to said this could be Nike getting its ducks in a row while prepping to offload the Converse business (i.e. shifting its most valuable asset — Shai and his product line — over to Nike before listening to offers for the Converse business). There have been persistent rumours in recent months that Nike is weighing up options to spin off its struggling subsidiary, allowing Nike itself to focus on its own core business. Buyer-of-dying-companies Authentic Brands Group was reportedly sniffing around Converse back in March. Given the increasingly acquisitive inclinations of Chinese sportswear giants Anta and Li-Ning, and their attraction to historic sportswear brands with rich IP, I wouldn’t be surprised if one or both were weighing up bids, too.
But an insider I spoke to said there was little credibility to the persistent rumours of a Converse sale, with Nike leadership aligned on turning around the brand.
“Converse will remain an important part of the Nike, Inc. family, and we are excited about its long-term prospects,” CEO Hill said to investors during Nike’s third quarter earnings call. “Overall, the work is not finished, but the direction is clear. Our teams are moving with focus and urgency, and our foundation is getting even stronger.”
As discussed at length in previous SportsVerse newsletters, Nike is going all in on its strategy to centre its athletes at the core of its business and brand appeal. While it has an incredibly deep roster of signature basketball talent on the men’s side, many of the biggest names in that cohort — like LeBron or Kevin Durant — are reaching the ends of their careers. Whether people like it or not, SGA is undoubtedly the answer to the “next face of the NBA” debate, with an incredibly marketable and fashion-adjacent persona, and a very likeable signature sneaker line already developed within the Nike ecosystem, albeit under the Converse banner. There’s a very plausible argument to be made that SGA was simply too good a prospect for Nike to pass up on to the benefit of another brand, even one in its direct control.
Nike leadership will be in the hot seat this time next week, under fire from increasingly impatient investors, when the company reports full-year earnings. One major topic of discussion will no doubt be the fate of Converse. Stay tuned.
That’s all for today, friends. Thanks for coming along for the ride.
See you next time,
DYM
