Nike Inc.’s fourth quarter earnings report indicates that the Converse brand remains a struggling franchise.
There’s been talk since early this year that Converse could be sold, particularly after layoffs at the brand were disclosed in February by Converse chief executive officer Aaron Cain. But Nike CEO Elliott Hill has intimated that a sale is not on the table.
For the quarter ended May 31, revenues for Converse were $244 million, down 32 percent on a reported basis and down 34 percent on a currency-neutral basis because of declines across all territories. The year wasn’t much better. Revenues were down $1.2 billion, down 31 percent on a reported basis and down 32 percent on a currency-neutral basis, also due to declines across all territories.
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After the fourth quarter report, analysts are pushing for a sale.
“Converse had a terrible quarter with revenue down by 32 percent. This is nothing short of a disaster and it raises the question of whether Nike actually has the bandwidth and will to fix the brand,” Neil Saunders, managing director of GlobalData, said. “If it doesn’t, it should look for an exit strategy to save Converse from becoming a drain on resources and management time.”
The internal move earlier this month by Shai Gilgeous-Alexander to Nike from Converse raises questions over what this means for Converse Basketball.
During the fourth quarter earnings conference call Tuesday, Hill said of the brand: “Converse sharpened its strategy this quarter. It’s getting clearer on the role it plays within Nike, and where it will grow, especially with the Chuck Taylor and Jack Purcell franchises.”
Hill also said that Gilgeous-Alexander and Nike Basketball “are a perfect match,” adding that the internal move allows “Converse to fully focus on service creators through its lifestyle business. That clarity matters.”
Not everyone is convinced.
Drake MacFarlane, research analyst at data firm M Science, observed: “If you go to their site right now, you’ll see that they have the Minions (and Monsters) on there, and I don’t know about you, that might not be what Generation Z really cares about.”
Converse has been in a tough spot for awhile, with three or four years of substantial declines, said MacFarlane, noting a continued trajectory where the brand has been shrinking over time.
“What’s interesting to me is that for Converse, fundamentally, there’s no reason why it couldn’t do well. It just doesn’t seem like there’s been the proper effort put towards it,” the M Science analyst said.
He’s not sure why Converse, as a “relatively low-profile shoe” that’s similar to Vans, or maybe even a Samba, can’t seem to capture the current favored low-profile trend in footwear. In theory, and excluding its hi-top line, Converse could actually be a competitor to some of these other players, MacFarlane said.
Looking at what some other brands have done, such as Adidas with Samba, the M Science analyst suggested that Converse could double down on limited releases or even different versions of a colorway.
Meanwhile, Converse this year celebrated Valentine’s Day with a “Chucks in Love” collection and May saw it reunite with fashion brand Madhappy for a new summer collaboration, the Converse x Madhappy Chuck 70. The duo’s last collaboration was in December.
