The Olympics aren’t just a global sporting event that brings together some of world’s greatest athletes. Its also a major marketing boon for big corporations.
That includes major American brands like McDonald’s (MCD) and Coca Cola (KO). And while the world’s largest athletic-gear maker, Nike (NKE), isn’t a formal sponsor—it is one of the brands that gets the biggest boost from the two-week long event.
But there are some doubts about Nike’s ability to leverage the sportswear maker’s brand to the top of the podium. Reuters, for example, concentrated on Nike’s soft stock performance during the Olympics, contending a weak performance puts it behind rivals Under Armour (UA) and Germany’s Adidas. That alludes to rumblings around the Nike brand that have existed since as far back as June, when Nike reported fiscal fourth-quarter sales that disappointed Wall Street observers.
But here’s the thing: Nike’s isn’t “losing” the Olympics. Wall Street traders aren’t moving the stock because of how Nike-endorsed athletes are performing on the track field or in the pool. That’s not how markets work. In fact, Nike’s stock is rated a “buy” by 23 analysts that track the stock. Nine have a “hold” rating, while zero are saying sell.
“It’s absolute nonsense,” says Trevor Edwards, president of Nike Brand, in an phone interview with Coins2Day while he’s in Rio for the Games. “We have 1,500 athletes from over 60 countries. Visibly you can see the brand’s presence.”
“One of the things I love about the Olympics is that this is one of the times that all eyes around the world are on sports,” he added.
Nike says there have been nearly 340 million views of an ad series called the Unlimited Campaign. Edwards also points out that over 70% of the athletes that won a gold medal in track and field events did so while wearing Nike gear, a helpful marketing buzz for a business that generates $5 billion in revenue for Nike at wholesale channels today.
The brand is so powerful that it even managed a big victory on the cover of Coins2Day‘s sister publication, Sports Illustrated. Gold medalist Michael Phelps is seen wearing a pair of Nike pants—despite the fact that he’s actually endorsed by Under Armour. And Simone Biles, a gold medalist gymnast, is wearing an Under Armour-made leotard but you can’t see the brand’s logo in the photo. (Biles is sponsored personally by Nike. There’s no logo on her outfit, nor on swimmer Katie Ledecky’s clothes).
So why is the Nike stock struggling? Nike is facing some tough competition from smaller rival Under Armour and resurgent Adidas, it is still a fairly fast growing company for such a big player in the athletics space. Sales in North America totaled about $14.8 billion for the fiscal year ending May 31, up from $13.7 billion a year earlier (though analysts are rightly worried about flat sales in the final three months).
Still, that business totaled $8.8 billion just before the London Summer Olympics kicked off in 2012. More growth is on the horizon: Nike is promising to reach $50 billion in global sales by 2020, a projection that factors in North American growth.
While Nike had enjoyed a strong run for the years when a Summer Olympics event was held, the stock has seen some softness during in 2012 when London hosted the Games and this year during Rio. Shares grew just 6% in 2012 and are down a little over 8% so far in 2016. Back in 2012, it was due to worries about sales softness in China (a problem Nike later fixed) and this time around, it is competitive pressure in North America.
When Coins2Day asked Edwards how he’d rate the brand’s performance during Rio, he demurred outright calling for a gold medal. He adds that over the past decade, Nike has delivered strong value for shareholders.
“As any athlete would say, I’d be inclined to say give us the gold,” Edwards said. “But there’s no finish line. It’s always about what’s next and continuing to improve and raising the bar.” He added that competition from rivals is actually positive. “It allows us to make sure we continue to push ourselves.”
