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Brands Speak on Olympics Impact

With the 2016 Olympic Games just days away, corporate executives are divided on the business impact they expect to see.
Rio de Janeiro | Source: Shutterstock
By
  • Bloomberg

RIO DE JANEIRO, Brazil — The 2016 Olympic Games in Rio de Janeiro is just days away, and while a number of corporate executives are expecting athletes' glory to rub off on their companies, others are telling shareholders to prepare for a tough quarter.

Firms like Nike Inc. and American Airlines Group Inc. expect to see positive impacts from the summer games during the quarter, but others, such as Netflix Inc., are issuing some caution. Here is a rundown of what these firms have told analysts in their most recent earnings calls.

American Airlines expects this to be among the rare international sporting events that is positive for the firm. Scott Kirby, the company's president, explained to analysts after its earnings report:

"Well, usually the Olympics, World Cups, conventions are a negative for revenues because business travellers just stay away because they can't get hotels, because they're worried about the crowds. And so business travel dries up. We've seen that in all the other Olympics. We've seen that at the World Cup. In this case, Brazil is so bad that there is no business traffic or close to no business traffic. And so, this year, I think it will be a positive just because Brazil has fallen so much before. Two years ago, I would have thought the Olympics would be a negative, and they would have been two years ago. But today because things have fallen so much, they're going to actually be a positive."

PVH Corp., a fashion company whose product line includes Speedo International Ltd., plans to do some marketing around the games, at which it sponsors several athletes. Here is what chief executive officer Emanuel Chirico had to say on the call.

"Speedo Fit is a platform designed to inspire and equip athletes at all levels to explore the power of training in the water. We held major events both in New York City and Los Angeles with our Team Speedo athletes to launch the campaigns. We are looking forward to the Olympics with Speedo and have some exciting events planned around the games and around our business."

Omnicom Group Inc., a global communications firm, was hopeful that the Olympics would help business in Brazil to pick up. Here's what chief executive officer John Wren said on the earnings call:

"While Brazil continues to be a challenge, we saw better performance compared to the first quarter of this year. We are hopeful that this trend will continue and that the recent changes in leadership and economic policies, as well as the Olympics later this summer, will have a lasting positive effect."

Foot Locker Inc. said the Olympics "drives innovation" just like other sporting events, and can create additional excitement around athletic shoes. Here's what chief executive officer Richard Johnson said on the most recent earnings call:

"On the Olympics front, there certainly is some technology that we'll see in the Olympics that will be commercialised later in the year. There's launches that coincide with that from the athletes and the players. There's benefit across all sorts of categories from our track and field business up at Eastbay to signature basketball that we'll have some Olympic silhouettes that certainly get launched through to some apparel technologies that will see from a lot of the brands that come out."

While Nike, which has regularly seen positive impacts during and even after previous games, expects the same this summer. Here is what Trevor Edwards, the president of Nike Brand, had to say:

"Ultimately, we get to close out our fiscal year and start a new one in the best possible way with the Summer Olympics. I can't wait for August and how powerful a moment it will be around the globe; the power of the world's greatest athletes coming together; the power of the reveal of the world's most innovative products; and the power of connecting with consumers in even more personal ways to celebrate their passion and love for sport. It's the kind of global experience that promises to further accelerate our momentum, and it makes me incredibly excited about what's in store."

Discovery Communications Inc. might not see a boost this year, but the company recently signed a deal for broadcasting the 2018-2024 games, and executives are already getting excited. Here is chief executive officer David Zaslav on the call.

"We continue to monetise our Olympics investment by signing sub-licensing deals in The Netherlands and Finland, which followed our deal with the BBC in the UK. These agreements significantly exceeded our plan. We have retained all rights to the Olympics on all platforms so that we could pursue incremental value and deals on mobile, on social media with players like Facebook Live and Twitter or going direct to consumer on our Eurosport app. The Olympics will not only be profitable, but based on the deals that we've done already, we expect the Olympics will make real money for us on each of the games."

Netflix, on the other hand, says its viewership could take a hit alongside the number of new customers during the period. Here's what chief financial officer David Wells said on the call when asked about the negative guidance.

"With an assumption of a hit from the Olympics, which largely affects us in the past on gross adds or on new subscribers coming in, that that's going to affect in terms of a year-over-year trend. We expect that to be a meaningful — small but still meaningful impact on the quarter. Negative impact."

Scripps Networks Interactive Inc. also voiced caution about the games. The TV operator specialises in lifestyle channels, such as HGTV, meaning it should see a fall in viewership during the games. Here's what chief financial officer Lori Hickok said on its earnings call.

"As a reminder, for the first half of 2016, we expect to realise a higher growth rate due in part to easier advertising comps for the US Networks segment and because TVN results were not included in the first half of 2015. We continue to expect that the third quarter will be impacted by the Summer Olympics and to a lesser extent the Presidential election. So it should be the slowest revenue growth quarter of the year. Then revenue growth should accelerate somewhat for the fourth quarter of 2016."

By Julie Verhage; editors: Joe Weisenthal and Isobel Finkel.

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