Nike’s most recent set of earnings are nothing short of extraordinary, particularly for a company its size. Nike’s revenue rose 15% to $8 billion. Net income rose $23% to $962 million. Although some may consider management’s statement when it released earnings a bit of an exaggeration, the comments might just be true:
“Fiscal year 2015 is off to a strong start. Our connection to consumers and ability to innovate, combined with our powerful global portfolio, is a complete offense,” said Mark Parker, President and CEO of NIKE, Inc. “NIKE has never been better positioned to realize our tremendous growth potential.”
One measure of current and future customer loyalty is brand value. In its most recent report on the world’s top 100 brands, Interbrand rated Nike in 24th place at $17.1 billion. Rival Adidas trailed well behind in 55th place at $7.5 billion. It is as if the German company’s decades in business barely count.
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The most recent quarterly numbers from Adidas were pathetic. Revenue rose 2% to €3.4 billion ($4.3 billion). Net income dropped 16% to €144 million ($183.5 million). Adidas has not only struggled with its core brand. Its Reebok brand has stopped growing and its Taylor golf brand is dying. Adidas has an excuse for the golf problem. It has plagued the entire sports gear industry.
Adidas CEO Herbert Hainer even admitted to the company’s failure in his most recent letter to shareholders. Rumors that he will be pushed out have become more common.
The edge Nike has over Adidas is hard to explain. Some of it has to do with strength in many of the world’s largest markets. The United States is first among these. However, a silver lining for Adidas is that its market share in China is nearly the same as that of the American company. Yet, that has not been enough to reverse poor investor expectations about the short-term prospects for Adidas revenue.
Nike’s brand advantage has been built powerfully over the past decade. Wall Street does not have to look any further than the mammoth Nike posters with the pictures of Michael Jordan, long retired, but still an icon.
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