Nike May Get Pickier but Full Spending Ahead on Athlete Endorsements

Troubled athletes are unlikely to slow Nike's spending on "demand creation."

— -- Nike Inc., despite severing relationships with two disgraced NFL athletes this month, is spending more on such endorsements and says it has no plans to pull back anytime soon.

The company’s advertising expenses, what it calls "demand creation," increased 23 percent in the three months ending Aug. 31, according to first-quarter earnings announced today.

That's $897 million compared with $731 million in the same period last year.

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In a conference call about its business, the company today said some advertising expenses, which were lower than expected, are delayed for launches later this year.

"Obviously, some issues are serious concerns to us," one Nike executive said during a conference call today, in response to an analyst's question about athletes' publicity issues. "On the other hand, we have great opportunities."

Nike finds "the athletes and teams that can inspire consumers," one executive said, and, "We remain singularly focused on that."

The corporation said in its earnings announcement that this past advertising increase was “mainly driven by marketing investments in the World Cup.” Nike wasn't an official sponsor at FIFA World Cup but it sponsored megastars like Brazil's Neymar da Silva Santos Jr. and Portugal's Ronaldo Cristiano.

Despite the string of negative athlete issues in the past few years, the “vast majority” of athletes whom Nike sponsors create an “enormous positive brand image” for the business and other athletic companies, Morningstar equity analyst Paul Swinand said.

“A great part of the athletic companies' brand value is also the cultural history that athletes have created in the past,” he said. “You can't ‘undo’ Michael Jordan, so to speak.”

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