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July 03, 2018

Nike favored to beat soccer juggernaut Adidas at World Cup

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Nike favored to beat soccer juggernaut Adidas at World Cup
France team soccer jerseys are displayed in a sporting goods store in Marseille

By Noel Randewich

In a World Cup brimming with upsets, Nike Inc (N:NKE) looks on track to defeat soccer juggernaut and archrival Adidas AG (DE:ADSGn) in the closely watched jersey sponsorship battle.

The two brands both have three teams playing in their jerseys in the quarter-finals, with one game yet to be played to establish the final eight. But the Nike swoosh decorates the outfits of Brazil and France, the sides most favored by betting websites to win the World Cup, plus Croatia.

Top German sports brand Adidas has Belgium, Russia and Sweden in the quarter-finals, and Tuesday's match between Adidas-sponsored Colombia and Nike-backed England will decide the final participant in the last eight. Puma SE (DE:PUMG) rounds out the group as the sponsor of the Uruguay team.

"While Adidas dominates the European leagues and the U.S. professional league, certainly any market share that Nike can pick up in a non-traditional U.S. sport can only bode well for the stock price and brand," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

Sports apparel makers typically sell the bulk of their fan merchandise ahead of the start of the World Cup, but a team's success on the field can generate extra demand for gear emblazoned with its emblems and colors.

U.S.-based Nike kitted out more teams than Adidas for the first time in Brazil in 2014. Adidas fought back this year sponsoring 12 of the 32 participating teams, including strong early contenders Germany and Spain, along with hosts Russia.

Nike supplied shirts for 10 countries this year.

(For a graphic on 'Jersey sponsors battle at World Cup' click https://reut.rs/2NkLUY5)

The tournament took a disastrous turn for Adidas last Wednesday, with 2014 champion Germany's unexpected elimination. Shares of Adidas, Germany's team sponsor, fell 2.7 percent in the following session.

In 2014, Germany accounted for a third of Adidas' roughly 9 million team jersey sales, Wedbush analyst Christopher Svezia wrote in a recent client note, with an incremental 10 percent of those sales resulting from Germany's tournament victory.

At the weekend, high-profile Adidas-sponsored teams Argentina and Spain were eliminated. Likewise, Mexico lost to Nike-sponsored Brazil on Monday.

Heading into this year's World Cup, Adidas downplayed its potential effect on sales, pointing to Russia's tepid economy.

But the World Cup remains a major marketing opportunity for Adidas, which is one of seven FIFA partners and the supplier of World Cup match ball since 1970.

As well as team jerseys, sponsorship of top individual players is critical for the promotion of soccer shoes. Ahead of the World Cup, Nike expected 60 percent of players heading to Russia to use its footwear.

Since the start of the World Cup on June 14, Nike's stock is up over 3 percent, helped mostly by a strong quarterly report and sales outlook last Thursday. Adidas has lost about 5 percent.

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