Adidas is crowing about its Olympic sponsorship, but judges might need an instant replay to tell whether it’s really a victory.
The sportswear and footwear maker has sold $156 million in Olympic apparel to date, three times what it made in Beijing and enough to recoup sponsorship and marketing costs. Anything from here on in is profit, adding to Adidas’ spectacular second-quarter report.
Adidas should not expect a sudden boom, though.
London 2012 goods have been available for a year, and unlike professional sporting events, an Olympic win doesn’t move much merchandise.
Still, Olympic sales have helped Adidas narrow Nike’s market advantage to just 1 percentage point in Great Britain, said CEO Herbert Hainer. As far as endorsements go, you could do worse than Prince William and Kate sporting your brand.
Looking for an immediate Olympic payoff might be missing the point. The $156 million gamble is more about branding, said Matt Powell, an analyst at SportsOneSource.
“It’s a significant investment in terms of branding. You can argue that branding is important,” said Powell. But he added he doesn’t think Adidas will make a huge profit on the Games.
No matter the ruling on London profits, Adidas looks poised to win gold in the industry this year. While Nike and Puma both had disappointing quarters, Adidas beat forecasts, clocking in 18 percent growth in net profit. It also revised its full- year earnings upward. The company now expects 15 to 17 percent annual growth in net profit, up from 12 to 15 percent.
In the stock market, the big two brands are far from a photo finish. Adidas shares are up almost 15 percent year to date, while Nike stock is down 4.6 percent.
Adidas performed well in the developing world this quarter, registering 13 percent growth in China and 18 percent growth in developing European countries. And while Nike still owns the American market, the three-bar brand snagged 8.4 percent of U.S. footwear and apparel sales year to date, versus 7.1 percent last year.
In Western Europe, the Olympics helped the company register 5 percent revenue growth despite economic gloom. But it was Euro 2012 that really drove that increase. The continental tourney netted Adidas $2 billion in sales, and sponsoring Spain’s champion team put some icing on the cake.
“The key to the Euro Cup is the teams you sponsor have to win,” said Powell. “In that case, they really did strike gold.”
No wonder Adidas has passed on sponsoring the 2016 Rio de Janeiro Summer Olympics to focus on the 2014 World Cup.
