Probably Why Nike Bid Jerry Lorenzo Adieu (2024)

HAPPY NEW YEAR, EVERYONE. HERE’S TO A BRIGHTER YEAR AHEAD!

For a brief moment at the start of Black Lives Matter protests in the spring, Adidas extended an olive branch to Nike on Twitter where it quote tweeted a moving Nike campaign. (And we all agree the reverse would never have occurred, correct?) It felt nice but still weird, not unlike a disturbance in the universe and yet, it took just seven months for all to return to normal with the two brands taking pot shots from each other on opposite sides on the fence.

The latest Nike versus Adidas dust up occurred when Fear of God designer Jerry Lorenzo announced last week he was joining Adidas, setting up a long-term partnership including the establishment of a dedicated Adidas/FOG division called Fear of God Athletics, a new silo that will include both lifestyle and performance basketball-themed offerings. As part of the partnership, Lorenzo will provide global oversight and direction over the German brand's basketball division.

The announcement marked the official end of Lorenzo’s celebrated partnership withNike, which had been viewed as on shaky ground at least since June when Lorenzo visited the Complex Sneaker Podcast where he alluded to Nike’s reluctance to sign him to a long term deal that included a performance element.

Lorenzo explained, “As much as I've loved my time with Nike and the opportunities that they've given us, unless they see the future the same way that we see the future, the cost doesn't necessarily make sense for us. We want to be on the basketball court. We want to be on the baseball diamond. We want to be training, running shoes and we want to enter into spaces outside of lifestyle.”

Even before the podcast, Lorenzo’s February 2020 “Question” campaign celebrating Reebok-signed Allen Iverson, which Nike never promoted, indicated something was amiss.

Lorenzo’s deal with Nike launched in late 2018 with the December debut of the Air Fear of God 1 performance basketball sneaker and ended this year in November 2020 with a collection of NBA-themed clothing.

Nike’s unwillingness to sign Lorenzo to a more expansive deal isn’t very surprising. For starters, Nike decision makers probably weren’t super enthused by the idea of creating a stand-alone performance silo with someone with zero performance bona fides. More so though, Nike established seven years ago it will only take collaborative partnerships so far when it let Kanye West walk over his request for royalty payments on his shoes.

Interestingly, Nike is not utterly opposed to enduring partnerships with creatives. In August 2017, the brand announced its partnership with Off-White designer Virgil Abloh who continues to work with the brand with new collaborate silhouettes slated to launch in 2021.

As well, recently it announced the launch of NOCTA, a new stand-along lifestyle brand made in collaboration with Drake. Possibly launched simply out of spite, Nike appeared to sub Lorenzo in press releases on the effort (which came before the Adidas announcement) that included the following quote from Drake: “I always felt like there was an opportunity for Nike to embrace an entertainer the same way they had athletes. I thought about how crazy it would have been and what it would have meant for an artist to have a flagship Nike deal.” Ouch! Notably, Drake’s NOCTA label is lifestyle and not performance.

Given Lorenzo has been pushing for a bigger partnership since late last year, it’s possible the athletic giant crunched the numbers and concluded a significant partnership with FOG much less a performance one simply didn’t fit into a plan that already includes managing three global brands.

Even looking at FOG’s potential trajectory as compared with Off-White (which has been a massive engine for building Nike’s SNKRS membership), the fever for Off-White’s shoe collaborations consistently has been higher and more sustained. According to StockX, Nike and Off-White have released approximately 65 sneaker silhouettes with an average price premium of 347%. Just eight of 65 silhouettes sell below the list price. The top four most expensive Nike and Off-White sneakers range from $3,797-$4,684.

Meanwhile, Nike and FOG over the course of two years released approximately 26 silhouettes with an average price premium of 102%. Among FOG’s silhouettes, four of 26 shoes (the dreaded mocs) are selling below list. The top four most expensive FOG silhouettes range in average price from $827-$1,819.

Just like shoes built for athletes (with the notable exception of Michael Jordan and LeBron James), sell through and demand for both Off-White and FOG was strongest at the start of the effort and has declined over time as excitement has fallen off and boredom has grown. Looking at the numbers, Nike execs had to conclude, why would we give FOG a bigger deal than we’ve provided Off-White?

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Let’s be clear, Lorenzo is a powerful creative who is correct to ask more of the brands he collaborates with. West’s decision to take his talents to Adidas through a lucrative licensing deal has taken him out of debt and established him as a billionaire. Imagine his path had he chosen to stay with Nike? Because of West’s stubborn insistence he be paid his worth, he not only helped himself but also opened a door for talented creatives to be paid more appropriately.

At the same time, it’s okay for Nike to pull out its calculator and conclude a new stand-alone silo with with FOG isn’t in its best interest. Over the past several year, Nike has indicated a near obsession with expanding its direct sales, a direction enabling it to lessen dependence on wholesale accounts thereby expanding control of its own destiny.

Adidas has also begun the process of pulling back on wholesale distribution, but unlike Nike, it’s shown an openness to setting up partnerships themed on licensing deals. In its deal with West and Yeezy, Ivy Park and Beyoncé and now potentially Lorenzo and FOG (specific details haven’t been revealed), the creatives retain ownership of the names while Adidas pays a licensing fee and provides production and distribution.

Slightly different approaches with different outcomes. Nike’s stock on January 1, 2020 was $101.78. It’s now sitting at $141.47. Meanwhile, Adidas started the year with its shares priced at $164.50 and is now priced just shy of $183.34. That’s a 40% increase for Nike versus an 11% year-to-date change for Adidas.

Predicting what’s to come for either brand, are you riding with Nike’s master of its own destiny approach or Adidas’ model anchored on licenses and global supply chain expertise? One point to ponder when weighing pros and cons, what happens to Nike’s stock price should its deal with Off-White ends versus what happens to Adidas’ if West walks.

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