Nike vs. Adidas: Who Wins When the World Cup Ends?

The World Cup is getting closer to the final match, and Nike and Adidas have battled hard. Now, which of these two sports behemoths is a better play for Foolish investors seeking long-term growth after the World Cup is over?

Jul 6, 2014 at 10:00AM

Adidas Football Via Adidas
Source: Adidas.

The World Cup is under way and getting closer to the grand finale. In addition, this globalmatch-up is pitting Nike (NYSE:NKE) and Adidas (NASDAQOTH:ADDYY) against each other for best long-term value after the tournament ends. The world cup is expected to have more viewership than any other televised event in the world. American Nike and German Adidas went head to head on the field as these companies' home teams battled last Thursday. Unfortunately for U.S. fans, the German soccer team won the day with a 1-0 victory over the U.S. But for interested investors, the game is still going. For Foolish value seekers, is Nike or Adidas a better play for the long term?

Espn World Cup

The world cup will be the most viewed event in history. Which team, or business, will win the most this summer? Source: WorldSoccerTalk.

Sponsoring the World Cup: Which team had the strongest play?
FIFA's World Cup partners pay a hefty price for the privilege to be so closely affiliated with the event. These companies reportedly pay some $25-50 million this year for the honor, of which Adidas is doing to continue its partnership started in the 1970's. Next in line are FIFA's World Cup sponsors, which pay in the range of $10-$25 million per year. However, while Adidas is paying this hefty amount, competitor Nike is not an official partner or sponsor. All of Nike's publicity at the event is coming from creative marketing and team or player sponsorship.

Nike and Adidas have each spent a significant sum sponsoring individual players and promoting teams for the World Cup. The two companies are the major players in these team sponsorships, together sponsoring 19 of the 32 teams in the tournament. Nike sponsors 10 teams, including Brazil and the United States, while Adidas sponsors nine, including the last World Cup champion, Spain, which unfortunately for Adidas was knocked out of the competition relatively early on.

Other than bragging rights, a strong bet in sponsorships and creative marketing could lead to increased sales momentum. In this way, Nike is already winning, as its choice to save on the hefty price of an official partnership with FIFA means it is already $25-$50 million ahead of Adidas, while so far getting seemingly just as much publicity. But beyond marketing dollars for the World Cup, which team is the best play for long-term investors?

Adidas Soccer Ball

Source: Fifa Store.

The incumbent victor: Adidas
Adidas has one major head start in this tournament having sponsored the last World Cup champion, Spain. Unfortunately for Adidas, Spain was already beat out, but the company still has some interesting prospects. 

Adidas chief executive Herbert Hainer recently commented that he estimated his company to generate approximately $2.8 billion from the soccer segment during this year, helped by the publicity of the World Cup. So, with what should be a strong return on investment from this World Cup, let's decide if the company's valuation makes sense.

At a P/E ratio of over 22, Adidas is a little pricey compared to the overall market, and it does not pay a dividend. However, the share price is near the bottom of its 52-week history, and World Cup revenues are still yet to come to balance out the large investments it's had to pay in the last couple of quarters getting ready for this summer. Still, to support this price, investors should ask if there is something coming that will cause future growth in this company, other than the same World Cup sponsorship it has played for the last four decades.

Nike Sponsored Atheletes Via Nike

Just some of the athletes Nike is sponsoring this summer. Source: Nike.

The next line up: Nike
Nike reported approximately $2 billion in soccer sales last year, a number that should climb substantially this year with the addition of extensive World Cup exposure in 2014. Additionally, this was only a small part of the company's total 2013 revenue of $25.3 billion.

One way Nike is up on Adidas already in this game, is that the company did not "officially sponsor" the games, meaning that its marketing tactics have less to make up before getting a good return on investment. Instead, the company is focusing on smart marketing and player or team endorsements. 

But more important than just throwing its name around on players jerseys, Nike has done an exceptional job of getting its name on players' feet. Soccer cleats, one of the only major innovative parts of the game, is one area where Nike is the unchallenged leader. With its newest soccer boot, the Magista, the company is proving it is the company continuing to drive product innovation, with more than just a marketing scheme.

This innovative company is not cheap, and Nike's P/E ratio of 26 is even more expensive than that of Adidas. However, for this higher P/E, investors are getting a 1.3% dividend yield, as well as rising revenues in 2013 and the start of 2014 as the company continues to drive product innovation.

Fifa World Cup

Source: IBTimes.

Which one is a winner?
With great operations from this year's World Cup, and interesting investment catalysts, both companies deserve a Foolish investor's look. But for investors looking for a long-term win, Nike seems to win this match up.

Though Adidas is cheaper now, the company doesn't have the same growth catalysts Nike has. For 2013, Adidas drove sales up 3% on a currency-neutral basis, well below Nike's 9.7% revenue growth for its 2013 fiscal year.

Most of all, Nike has the innovation to back up its price, as is evident in how much more prominent its soccer cleats are in this year's tournament. However, Nike is certainly not cheap right now, and for value investors, it might still be too expensive to get in now. Fortunately, this next company might be a much cheaper long-term play on innovation.

This might be the way to bank on innovation, before everyone else does
Imagine the multibillion-dollar sales potential behind a product that can revolutionize the way the world shops and interacts with its favorite brands every day. Now picture one small, under-the radar company at the epicenter of this revolution that makes this all possible. And its stock price has nearly an unlimited runway ahead for early, in-the-know investors. To be one of them and hop aboard this stock before it takes off, just click here.  

Bradley Seth McNew has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers