What The Kaepernick Campaign Means For Nike

Nike Inc NKE's decision to enlist Colin Kaepernick among others in a powerful advertising campaign has captivated many. Both #Nike and #BoycottNike were trending by Tuesday morning.

Some called it one of the most controversial decisions Nike has ever made, a bold claim for a company that has a long history of controversy.

Kaepernick has become one of the most polarizing figures in America since the fall of 2016. His position on kneeling for the national anthem to protest police brutality, particularly the shooting and treatment of unarmed black men, encapsulated just how divided the nation has become and sparked a fervent debate that has plagued the NFL the past two seasons.

Kaepernick, 30, hasn't played in an NFL game since December of 2016 and has been a free agent since March of 2017.

Fundamentals Haven't Changed

Nike shares closed Tuesday down 3.1 percent as many call for a boycott of Nike products. Under Armour UAA, arguably its biggest rival, closed higher by 1.4 percent.

Only time will tell how these political stances by publicly traded companies will play out. If a company is on the right side of the debate, they could be rewarded handsomely. Kaepernick has become such a politically charged figure, Nike knew it could capitalize on his image, but also surely anticipated the backlash siding with him would receive.

"Nike really injected itself into the conversation when a lot of people believed it didn't have to,” sports attorney Darren Heitner told Benzinga. “Investors in the short term are worried about the ramifications ... [but] the fundamentals of the company haven't changed at all."

Heitner said the association with Kaepernick may certainly drive away some potential business, but it's a very small factor in the grand scheme of things,

“Trade with China and tariffs would be much more meaningful and would justify a swing, 2-3 percent is to be expected but if you see anymore than that it's probably an overreaction," he said.

Buckingham Research analyst Eric Tracy said in a note the campaign is a near-term headline risk, but is consistent with Nike's brand DNA and customer cohort. The analyst maintained a Neutral rating with an $80 price target.

Taking A Stand

Matt Powell of NPD Group said companies can't stay neutral anymore.

“The consumer wants brands to take visible stands on social issues," Powell told Benzinga. "This is another example of that and whenever that happens they run the risk of alienating consumers. In this case, it is a small minority that are anti-Nike."

According to NPD data, two-thirds of the people that wear Nike are under 35 years old.

“Millenials and Gen Z are aligned with Nike’s position here, so I think they understand who their customer is and are aligned with them. We know from surveys these generations are much more liberal much more progressive in their thinking and much more diverse ethnically. It's logical that they are really aligning with that demographic,” he said.

Nike has amassed a remarkable amount of publicity thus far from the campaign. There have been more than 2.7 million mentions of Nike over the last 24 hours, a 1,400-percent increase compared to the previous day according to Talkwalker, a social media analysis firm.

Nike has always been provocative in their marketing and have always stood behind its athletes, Powell said, and he believes the boycott talk is an overreaction -- Kaepernick is just one part of Nike’s much bigger 30-year anniversary of "Just Do It."

"It’s part of a long-term branding story," Powell said.

Nike's stock is still up nearly 27 percent in 2018. Shares closed Tuesday at $79.60.

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Photo credit: Austin Kirk, Flickr