Saturday, July 05, 2008

Nike: Too much marketing?

I have a professional bias in favor of spending money on marketing. A few weeks ago, I mentioned an article I recently did about maintaining ad/promo levels during a recession. But here's the other side of it:
Nike's increased marketing spend on Olympics efforts and store-related expenses have some analysts concerned about the company's ability to compete in tough economic times.

"It was the two expense issues that drove this worry," said Matt Powell, a footwear and retail analyst for Princeton Retail Analysis, Princeton N.J. "The marketing spend was greater than people expected and it made everybody nervous"

During a conference call with analysts on Wednesday, Nike executives said marketing expenses for the Olympic Games and the Euro Cup soccer tournament would cut hurt fiscal 2009 earnings.
It may just be my bias showing, but I'm also looking at Nike's track (so to speak) record of successful growth. My guess is that this will turn out well for Nike. But perhaps not -- anything can be overdone.

In any case, Nike management seems to take a realistic view:
Nike executives tried to assuage some concerns, noting that the increased spending on marketing in the year of the Olympics is normal and smart. However, they were realistic about challenges the company faces in the U.S., where fourth quarter (ended May 31) revenue grew only 4% to $1.7 billion, compared with 16% to $5.1 billion worldwide.

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