The Kicks You Wear, Vol. 410 — The dirty on DTC 👀
Nike's DTC screw up has it in some legal trouble.
Goooood morning, folks! Welcome back to the Kicks You Wear. Thanks so much for rocking with me today. Appreciate you.
Is your bracket busted yet? Mine are in pretty good shape so far on the men’s and women’s sides. My championship picks are still alive. Thank GOODNESS for Derik Queen, man. What a game-winner.
(Yes, I picked UMD to win it all. No, I’m not confident.)
Let’s get into it.
Nike’s direct-to-consumer mistakes
Nike’s direct-to-consumer efforts have left the company in a bad place, considering the numbers we discussed on Friday. It also seems to have left the company in quite a bit of legal trouble.
What’s happening: The Oregonian’s Matthew Kish delved into the lawsuit Nike's shareholders filed against it. The filing paints a picture of DTC as a “ticking timebomb” the brand’s top executives knew would lead to disaster.
Instead of warning shareholders and employees about it, the lawsuit claims, executives pressed on.
The backdrop: Nike’s direct-to-consumer initiative, crafted by former CEO John Donahoe in June 2020, changed the company on two fronts.
It peeled back on the brand’s relationships with wholesalers like Foot Locker, Macys, JD Sports and more. Instead of selling products to them at wholesale rates, Nike would sell the product itself via its stores and digital fronts.
Speaking of digital fronts, the brand’s big Nike Direct push was the second part of the strategy. It focused on opening physical locations and beefing up its digital strategies online and via apps.
The strategy seemed to work for a while during the COVID-19 pandemic — at least to us on the outside. But, according to this lawsuit, there were apparent cracks in the armor as early as 2021.
The details: “The lawsuit brims with details, including claims of mismanaged inventory stacked so high it caused OHSA violations and a ‘shadow organization’ run by Nike’s former top technology executive.” Kish reports.
Problems with inventory are at the root of everything here. As product piled up and the company’s supply chain faltered, it became clear that Nike needed to reverse course. However, the lawsuit claims Nike continued to invest in this strategy that wasn’t working.
Nike remained committed to opening small-front stores that were never going to open, according to the complaint.
It also includes details of a $400 million deal with Adobe that was reportedly made to send personalized emails to customers. The deal was supposed to generate $1.5 billion in revenue. Instead, the lawsuit alleges, it delivered “zero.”
The complaint also alleges Nike’s former tech leader, Ratnakar Lavu, ran a “shadow organization” that employed more people than needed, leading to 200 layoffs.
The lawsuit describes how Nike’s executives wasted money and resources on failed strategies, eventually resulting in the company laying off workers to rebound. That laid-off workforce represents years of institutional knowledge that would’ve helped with innovation, which would have made Nike’s bounce back much easier.
Yes, but: That has to be proven. While the filing is thorough and detailed, it doesn’t offer much proof that executives knowingly tanked the organization with a bad plan and purposefully misled its shareholders.
The defense will likely argue it’s one thing to be reckless and stupid. It’s another to actively know you’re leading investors to sabotage but keep it going.
The shareholders will have to find a specific moment or incident in which Donahoe or another high-ranking executive knew its strategy was failing but deliberately decided to continue.
I’m no lawyer, but if they can’t find that smoking gun, this lawsuit will remain in he-said-she-said territory. That’s not necessarily where you want to be legally. That’s the best leg Nike has to stand on with this, and it’s a pretty good one.
I don’t know what this will ultimately amount to. The plaintiffs haven’t even specified what damages they’re seeking.
What I do know is this: Nike is trying to put the Donahoe era behind it as quickly as possible. This case doesn’t help. I could be wrong, but I wouldn’t expect this to last long.
What a cool market looks like
The theme of this year in sneakers so far has primarily been everyone from footwear brands to consumers preparing for financial pain. People have not been willing to spend on things that probably would’ve flown off shelves just two or three years ago.
Case in point: Salehe Bembury’s latest collaboration with New Balance.
New Balance released a new Salehe 991v2 on its website last week. The 991v2 is one of the brand’s hottest silhouettes, and Bembury is a prominent collaborator. Given those factors, you’d think you’d have a hit.
Nope: Not in 2025. The model is sitting. Only size M11 is out of stock.
Be smart: One look at the screenshot above reveals why there’s no motion for this drop. The retail price is $274.99. Add in shipping and taxes, and you’re easily talking about a shoe that will cost you $300.
Between the lines: While that’s extremely expensive, that price tag hasn’t always been a deal-breaker in the past.
In 2022, the J Balvin Air Jordan 2 retailed for $300 and still sold through inventory.
The navy blue Jjjjound 990v1 retailed for $265 and sold out almost immediately upon release in 2021.
Had the above 991v2 been released anytime between 2021 and 2023, it would probably have sold out, too.
The difference: We don’t live in that time anymore. People aren’t willing to shell out $300 for a sneaker considering the anticipated economic downturn every financial institution continues to signal we’re headed toward.
I’m not sure if sneaker brands have gotten that message yet. But if they haven’t, they will soon.
A signature JFG model
Joe FreshGoods has a signature shoe project coming, according to Joe himself.
What’s happening: Joe FreshGoods told Coco Gauff that he’s designing his own sneaker. He revealed the info at a promotional event for Gauff’s upcoming Coco “Delray” sneaker.
JFG said he’s taking a page out of Coco’s book for his own signature model.
“I’m in the process of making my own shoe,” he told Gauff. “I think I’ma call it the neighborhood I’m from. I got that from you.”
Why this matters: It’s rare that we see a collaborator like JFG get a full-on signature model. Usually, the job is to color within the lines of an existing silhouette and make it your own. This is another level.
Between the lines: It’s unclear whether this model is launching with New Balance or if JFG is moving independently.
If it is an NB model, it is more uncharted territory for a brand. They have never had a collaborator launch their own inline model.
Heck. New Balance only has a handful of signature athletes: Gauff, Kawhi Leonard, Shohei Ohtani and Francisco Lindor. That’s it.
Joe FreshGoods has earned enough cache with New Balance as a creative to get this sort of runway. It’s a bit risky from a brand standpoint, but if things work out? The payoff could be tremendous.
It’s time to D-d-d-d-duel!
All of my Saturday morning WB Kids cartoon watchers will understand that reference.
It’s our time, anime nerds. Yu-Gi-Oh! is finally getting that Nike collab we’ve been waiting decades for. Joey, one of the main characters in the series, rocks a pair of shoes called the “Air Muscles.” They’ll look incredibly familiar to you.
The sneaker is an obvious riff on the Air Max 95 — the latest Air Max model from when the Yu-Gi-Oh! Manga was first serialized in 1996.
Nike is bringing the Air Muscle (lol) to life with an apparel collection, which could make Halloween pretty easy this year.
Being an anime nerd is finally paying off professionally. I knew the day would come.
What’s droppin’, bruh?
Nike Air Max 1 “Donkey Kong” — Wednesday, March 26
Nike Air Max DN8 “Snake Skin” — Wednesday, March 26
New Balance 992 MiUSA “Mushroom” — Thursday, March 27
Vans x Gallery Dept. “Splatter” — Thursday, March 27
Jae Tips x Saucony Grid Jazz 9 “I love you, but I'm busy” — Friday, March 28
UnheardOf x Adidas Adistar Cushion “Pork Chop Piggy” — Saturday, March 29
A Ma Maniére x Air Jordan 3 “For The Love” — Saturday, March 29
That’s a wrap, folks. Thanks for reading. Appreciate you. Hope you have a fantastic week.
If you have any questions, comments, or concerns, hit me up via email at mikedsykes@gmail.com or shoot me a message via Substack here.
Peace and love. Be safe, be easy, be kind. We out.
-Sykes 💯