Apparel

Nike shares fall as backlash erupts over new ad campaign featuring Colin Kaepernick

Key Points
  • Nike shares fall Tuesday after the company revealed a new ad campaign featuring Colin Kaepernick.
  • The news of Kaepernick, who in 2016 decided not to stand for the national anthem to protest racial injustice, becoming the face of Nike marketing sparked some backlash from consumers on social media.
  • #NikeBoycott is trending on Twitter, with some people saying they were going to burn their Nike sneakers.
Nike stock reacts to Colin Kaepernick ad campaign response
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Nike stock reacts to Colin Kaepernick ad campaign response

Nike shares fell Tuesday after the reveal of a new ad campaign for the 30th anniversary of "Just Do It," featuring former San Francisco 49ers quarterback Colin Kaepernick, pulled a wave of responses, both for and against the marketing materials, on social media.

The stock closed the day down roughly 3.2 percent, as #NikeBoycott was trending on Twitter.

On Monday, Kaepernick shared a photo of the campaign on his Twitter account. He's been a polarizing figure in the sports universe ever since he decided not to stand for the national anthem during a 2016 NFL preseason football game to protest racial injustice.

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Kaepernick has been a Nike-sponsored athlete since 2011, a source familiar with the deal told CNBC. Until this week, it was unclear how Nike would work again with the athlete. Kaepernick had previously been featured in several campaigns for Nike football and training. However, he's not currently signed with a National Football League team.

The NFL didn't respond specifically to Nike's decision to use Kaepernick in their ad campaign but issued a statement Tuesday afternoon saying: "The social justice issues that Colin and other professional athletes have raised deserve our attention and action. ... We embrace the role and responsibility of everyone involved with this game to promote meaningful, positive change in our communities."

Nike did see backlash on social media, though there are also plenty of people backing the campaign. Other athletes including Serena Williams, LeBron James, Lacey Baker, Shaquem Griffin and Odell Beckham Jr. are also being featured in the ads, according to Nike. But Kaepernick has taken the spotlight.

The idea of the campaign is to showcase athletes overcoming obstacles, a source familiar with the ads said. A photo of Williams playing tennis says, for example: "Girls from Compton don't play tennis. They own it." Another one of Beckham Jr. playing football reads: "Don't wait until you've won a ring to play like it."

Nike signs Colin Kaepernick to new endorsement deal
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Nike signs Colin Kaepernick to new endorsement deal

Tweeting #NikeBoycott, some people were saying they were going to burn their Nike sneakers or cut the swoosh logo off their socks because of the ad with Kaepernick.

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Some people were also saying Tuesday that former Arizona State University and Arizona Cardinals football player Pat Tillman should've been the face of the new Nike campaign. Tillman left the NFL to join the army after 9/11 and later died in Afghanistan.

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"While Nike has been doing relatively well in a sports market that is under pressure, it cannot afford to make bad decisions," said Neil Saunders, managing director at GlobalData Retail. "Anything which has the potential to damage market share, such as overtly political campaigns, should be avoided."

While industry analysts say the move by Nike is risky, others say risky moves are necessary to stay relevant and stay ahead. Furthermore, Nike is a global brand with a far-reaching audience — not all of its shoppers are paying attention to American football, Allen Adamson, brand expert and co-founder of marketing solutions business Metaforce, told CNBC.

"No matter which athlete they choose, they will offend some customers," Adamson said. "If you try to please all people all the time, you will end up pleasing nobody."

More and more, younger consumers want to know what their favorite brands stand for, he added. That gives Nike more of a reason to take a stance.

Nike has recently started to see a "return to growth" in North America, which has been a sluggish spot for sales for numerous athletic apparel and sneaker brands thanks to a wave of wholesalers' bankruptcies. The company has, as a result, been investing heavily in building out its own e-commerce platform and refreshing stores, with the goal of selling more directly to consumers.

Nike is set to report quarterly earnings later this month. Its shares have climbed about 27.5 percent so far this year. Nike has a market cap of roughly $127.4 billion.

— CNBC's Jessica Golden contributed to this story.