- Nike defended Naomi Osaka’s decision to withdraw from Roland Garros
- Adidas and Under Armor struggled to recover from challenges posed by the Covid-19 pandemic
- Could Gymshark be a legitimate competitor to industry giants?
There is no lack of opinions on Naomi Osaka’s decision to withdraw from Roland-Garros.
Her defenders argue that she should be praised for discussing the mental health issues she has faced since winning her first Grand Slam tournament in 2018, which she says have been exacerbated by the post-match interviews that are compulsory in the event of victory or defeat on the circuit.
But not everyone agrees. Some say Osaka has a duty to give media time, which contributes significantly to its own salaries and those of its peers. Just because she receives generous financial support and doesn’t rely on the cash prizes provided by the tour, she shouldn’t be above media attention.
The debate fuels a long-standing narrative in professional sports: To what extent does the behavior of its stars influence the marketability of the industry?
Many, according to the annual reports of Nike (United States: NKE) and Adidas (FROM: ADS). Besides the quality of the products and the efficient sourcing of materials, Nike cites “identification with prominent and influential athletes” as a key aspect of competing in the industry. Adidas states that “creating innovative concepts to meet the needs of athletes is a prerequisite for strengthening our position in the market”. Nike’s brands were worth $ 246million (£ 174million) at the end of fiscal 2020 last May, Adidas – the more legally aggressive of the two giants – had brands worth $ 1.3 billion euros (£ 1.2 billion) in December.
The importance of brand identity is why Nike was quick to defend the Roland Garros decision in Osaka: “Our hearts are with Naomi,” the company said in a statement. “We support her and recognize her courage in sharing her own mental health experience. “
Osaka is extremely valuable to Nike. She has 2.4 million Instagram followers and uses her social media presence to influence politically sensitive issues. In addition to mental health issues, she has spoken out against racial and gender inequalities, while her heritage – Japanese mother, Haitian-American father – forms the basis of a story that sponsors want to be a part of. Unlike most sports stars, Osaka’s approval deal with Nike isn’t limited by playing time – she’s just as valuable off the pitch as she is on it. .
But relying on the personal image of sports stars works both ways. Nike was quick to drop its association with Brazilian footballer Neymar after allegations of sexual assault were brought against him by a member of company staff. He’s also distanced himself from athletes in the wake of drug scandals – including Maria Sharapova, Lance Armstrong and Marion Jones – and shut down Project Oregon – his track and field training facility – following accusations of intimidation and drugs surrounding coach Alberto Salazar.
A close association with prominent sports stars also carries the risk that these leading figures will find favor elsewhere. In 2018, Roger Federer – who also retired from Roland Garros and is the only tennis player to win more mentions in 2020 than Osaka – ditched Nike in favor of rising Japanese brand Uniqlo. The parent company of the brand Fast retail (TYO: 9983) has seen its stock price rise 114% since Federer joined the fold.
And it’s not the only company to encroach on the Nike / Adidas duopoly in recent years. Under protection (US: UAA) sales grew from $ 3.9 billion to $ 5.2 billion between 2015 and 2018 – a period in which he signed major support deals with the NBA star Stephen Curry, heavyweight boxer Anthony Joshua and tennis champion Andy Murray.
The mighty fall
But maintaining an edge in the fast-paced world of elite sports isn’t easy. Under Armor’s growth stumbled over allegations of poor corporate culture under founder and former CEO Kevin Plank. At the end of 2018, he fell prey to his own ambitious growth plans, particularly in college sports – a $ 280 million deal with UCLA could have been the largest in sports history. academic, but forced Under Armor out of its area of expertise, which led to questions about the quality of its products. After 26 quarters of revenue growth of at least 20% year-on-year, annual revenues grew only 1% in 2019, while operating margins fell to 4% (from 10% three years higher). early).
Adidas has also hit a buffer in recent years. The company’s heavy investment in ethically-sourced, plastic-free fashion was disrupted by the pandemic and in 2020, the group’s turnover fell 14% to 19.8 billion euros. Its Reebok division – which derives most of its money from the United States – was particularly hard hit, with currency-neutral revenue down 16% to € 1.4 billion in 2020. The company took an impact 50% off the Reebok brand value. and has since started its formal sales process.
So if investing in green initiatives and top performing athletes is not enough to keep activewear companies thriving, where will the next phase of growth come from?
The answer could lie in the influence model, pioneered by Gymshark. The UK company earned a valuation of $ 1.3 billion less than 10 years after its inception thanks to two simple business principles: focus on the target audience and own the supply chain as much as possible.
These principles have helped make the company extremely profitable. Rather than chasing professional sports stars, the company used the power of ambitious fitness gurus with a big social media presence. Signing up for an ‘influencer’ is much cheaper than negotiating a sponsorship deal with a highly paid (very nervous) professional athlete, but has given Gymshark access to a huge number of potential clients. In 2020, as the world started training at home and sharing their experiences on social media, Gymshark reported a 50% increase in revenue and 64% increase in pre-tax profits.
|Gymshark thrived during the pandemic when its bigger peers struggled|
|Gymshark (£ m, end of July)|
|Adidas (€ m, end of December)|
|Nike (m $, end of May)|
|Operating result||2,770||4 724||-41.36|
|pre-tax profit||2 887||4,801||-39.87|
|Under Armor (M $, end of December)|
|Source: Maison des entreprises, FactSet|
And this model does not seem likely to dry up after the pandemic. Social media has given the public unprecedented access to the lives of their “heroes” whose behavior beyond the sports field is now just as important as winning medals. This explains why politically engaged Naomi Osaka is one of Nike’s greatest assets.