Nike’$ Po$$E: Sampras, Agassi, Cal

In the past week, Cal Ripken Jr. broke Lou Gehrig’s record of playing in 2,130 consecutive major league baseball games. Pete Sampras, Andre Agassi and Monica Seles reached the finals of the U.S. Open. Deion Sanders signed a $25-million deal with the Dallas Cowboys.

Did anyone have a better week than those sports stars?

Try Phil Knight.

Knight, the chairman of Nike Inc., has all these athletes in his company’s Beaverton, Ore., stable. They all made their mark in Nikes.

These celebrities, and dozens more in nearly every sport being played by men or women, wear clothing with Nike’s logo. Most appear in the athletic footwear and apparel company’s witty commercials on television. In return, Nike lavishes big bucks on the marketing symbols.

Only their accountants know for sure how much. Nike won’t say.

But David Burns, head of Burns Celebrity Incorporated, which matches athletes with promoters, estimated that Chicago Bulls star guard Michael Jordan alone earned payment in the seven-figure range during the height of his basketball fame in the 1980s. Jordan’s advantage was that he received a percentage of Jordan-related Nike sales.

Other Nike stars earned in the six-figure range, he said, if they failed to negotiate the same terms.

“After this week, Nike is humming on all cylinders,” said Peter Russ, analyst with Shelby Cullom Davis. “It is promoting relentlessly and intelligently. It has emerged as the second-best company at building a franchise, behind only Coca-Cola Co.”

Russ and other analysts and marketing experts interviewed said it’s difficult to quantify what Nike’s burst of publicity will mean to its bottom line and stock price.

“The publicity value is definitely a positive,” Russ said. “It puts Nike closer to where Phil Knight wants to be: a company that has $30 billion in sales by the year 2005.”

Nike now has annual sales of about $6 billion. Advertising is playing a huge role in reaching the stars.

“From the very first day, when we had, like, three athletes in the stable, we said our goal is to win their hearts as well as their feet,” Knight said. “And overall, I think we’ve done a great job of that.”

Nike’s formula is simple, the company insists. “Really, about 80 percent of what we do is product-driven” said Liz Dolan, marketing director at the company. “Then we do some good ads on top of that and get some cool athletes on top of that.” Nike followed that game plan to capitalize on the earliest victories of Chicago Bulls superstar Michael Jordan. Nike created an “Air Jordan” line of sneakers (or, as Nike prefers to think of the products, athletic shoes). Seldom has any product done as well for its designer’s bottom line or as much for an athlete’s marketing career.

“In the case of Michael Jordan, Nike sold $200 million of Jordan-related products,” said Jennifer Black Groves, executive vice president with Black & Co. a Portland investment company.

Nike hopes the current push from its sports stars will carry it through what are likely to be more challenging times in the near future.

Investors fret that Nike’s shares are overvalued.

The world’s largest athletic shoe company, which was reported by CNBC commentator Dan Dorfman to be interested in buying Timberland Co., a shoe company in Stratham, N.H., said on July 11 that net income rose to $113.4 million, or $1.56 a share, from $69.2 million, or 93 cents, a year earlier.

This exceeded analyst expectations of $1.40 a share for the quarter ended May 31, based on the average estimate of 16 analysts surveyed by Zacks Investment Research. Revenues rose to a record $1.41 billion from $1 billion.

But it isn’t the price of Nike’s stock or its current operations that are scaring off analysts. Among the problems on the horizon is age. Ripken, hailed this week for his durability, is 35 years old, which makes him something of a senior citizen in the youth-oriented world of sports. Charles Barkley, another top basketball star and Nike endorser, is also in his 30s. Injuries forced Bo Jackson, the all-purpose sports star, into retirement from football and basketball.

Then there’s Michael Jordan, basketball superstar and dominant symbol of the sport. Nike hoped to replace Jordan, but fell short of snaring the player who figures to be his heir apparent as NBA megastar: Shaquille O’Neal.

O’Neal, of the Orlando Magic, still in his early 20s, has established himself as a top scorer and charismatic performer. O’Neal snubbed Nike when he joined the NBA, signing with arch rival, Reebok International Ltd.

Reebok, with O’Neal, and Adidas, with Stefi Graf, are pinning their hopes on thinner stables headed by just a handful of acknowledged superstars.

Still, Nike must also worry about over-exposure.

“Nike’s U.S. retail outlets may seek to de-emphasize its products because these outlets don’t want to become too dependent on Nike or any other single brand,” said Russ.

Heavy advertising is the cornerstone of Nike’s sales strategy.

“You can have the best product in the world, but if nobody knows about it, what good is it?” Knight said.

Nike got all kinds of national publicity — and some of it appeared to have questionable value.

Nike appeared heavy-handed when it worked with the Dallas Cowboys. Nike and the Cowboys have announced a seven-year sponsorship agreement that will have all Cowboy players and coaches wearing Nike products. Then there’s the football theme park the football team and the athletic shoe company will build together. Nike, however, doesn’t have a full licensing agreement with NFL Properties, the marketing arm of the league which must sanction all these kinds of agreements.

Nike has no apologies for pushing the envelope.

“The whole thing with marketing is that the consumer has to know what the products are and if you’re totally predictable they’re going to tune you out,” Knight said. “That’s one of the reasons we’re always trying to push things.”