ESPN.com - Nike hopes to cash in on 'retro' Converse

ESPN.com: Sports Business

Wednesday, July 9, 2003
Updated: July 10, 6:03 PM ET
Nike hopes to cash in on 'retro' Converse

Associated Press

BOSTON -- Chuck Taylor basketball shoes are getting a Nike swoosh.

All for King James?

It might seem like an innocent transaction. Nike clearly wants to stay committed to the retro market for years to come and Converse is a brand that can't seem to go away. But there could be a more timely reason why the deal was made now.

On June 14, 2002, Converse filed for the trademark to use the term "King James" on clothing and footwear, according to the United States Patent & Trademark Web site.

King James is, of course, one of the most popular nicknames, along with "The Chosen One," for Nike's latest superstar LeBron James, who signed a seven-year, $90 million deal with the company in May.

But for some strange reason, Converse abandoned the trademark on April 3, 2003, roughly a month and half before Nike signed James. It has been speculated that Nike was planning on using the "King James" moniker.

"It was a coincidence, but it wasn't part of the deal," said a Nike spokesperson. There is not any shoe or piece of clothing on the Converse Web site called King James, so it does not appear like the company ever used the mark.

Interestingly, Chuck Taylor, the namesake of the Converse brand, hailed from Akron, Ohio -- James' hometown.

Other companies that have the right to use the King James name on their products include a cheesemaker and a printing press.
-- Darren Rovell, ESPN.com

Nike Inc. announced Wednesday it had agreed to buy Converse, Inc., which dominated the basketball shoe market from the 1920s to the 1970s and is best known for its famed "Chuck Taylor All Star" sneakers.

By the 1980s, Beaverton, Ore.-based Nike had overtaken Converse's rubber-toed product as the dominant basketball shoe. Converse filed for bankruptcy in January 2001, shifting production from Lumberton, N.C., to Asia. Later that year, the North Andover-based company was bought by private investors who have tried to revive the brand.

Last year, Nike had $10.7 billion in revenue, while Converse reported $205 million.

Robert Toomey, a regional analyst for RBC Dain Rauscher in Seattle, said Nike was probably looking to cash in on the popularity of "retro" shoes and Converse's close brand association with basketball, particularly for Americans who grew up in the 1950s and '60s.

Earlier this month, New Balance relaunched its PF Flyers canvas sneakers, jumping on the retro bandwagon.

"Retro styling has come back so strong, a lot stronger than I would have expected," Toomey said.

When asked if Nike would pay cash, Nike spokeswoman Joani Komlos said the payment process would not be disclosed until after the deal is closed.

"Converse is one of the strongest footwear brands in the world with great heritage and a long history of success," said Tom Clarke, Nike's president of new business ventures.

Converse invented basketball shoes in the early days of the game, and "Chucks" got their name from Chuck Taylor, a Converse salesman who criss-crossed the company from the 1920s until the 1960s, evangelizing the game and selling shoes.

But by the 1970s it was crippled by internal problems -- including the disastrous acquisition of apparel-maker ApexOne.

There was also bad luck. While Nike signed Michael Jordan, who became the NBA's greatest star, Converse signed Latrell Sprewell, who tried to choke his coach during a practice and was dropped as an endorser.

During the 1980s, Chuck Taylor shoes, which the company still sells, enjoyed a renaissance. But this time the customers were grunge rockers and baby boomers, not basketball players. Its "Grandma-ma" ads with basketball player Larry Johnson were a hit but the sneakers continued to struggle.

Apparel-industry veterans Marsden Cason and William Simon bought the company out of bankruptcy and tried to rebuild Converse's reputation as a maker of top-of-the-line basketball shoes.

Converse did expand its brands with the Jack Purcell and One Star brands, and the company has made some progress. The year before bankruptucy, sales were $145 million.

The deal, which remains subject to regulatory approval, would give Coverse the deep-pocketed backing and marketing depth to push its brand worldwide, while offering Nike a fashion niche it may have been missing.

"Our partnership with Nike creates significant opportunity for us to execute our vision for building a leading global sports footwear and apparel brand by growing our core business and expanding our product offerings into other sports performance and lifestyle categories," Converse Chief Executive Officer Jack Boys said.

Toomey said the deal was the latest "selective acquisition" for Nike, which has expanded its portfolio to include Cole Haan, Bauer and Hurley Internationa, a teen line.

"They're always on the lookout for building their marketshare and strengthening their stable of products and brands," Toomey said.