by Dan Burrows | August 1, 2014 6:00 am
The most exciting World Cup since, well … since the last one, is just a memory, but the effects linger on in a number of corporate earnings reports this season.
Whether the World Cup helped or hindered quarterly results is important — but also somewhat beside the point now. Companies that got a boost will have to cycle against tougher comparisons next year. And any reports that got dinged should have an easier time coming up against those numbers in a year’s time.
In short, the World Cup is a huge deal every four years, and it can distort corporate results.
A wide range of industries had exposure to the World Cup. Caterpillar’s (CAT) heavy machinery and trucks were used in the construction needed to prepare venues. Companies from Coca-Cola (KO) to Johnson & Johnson (JNJ) to Yingli Green Energy (YGE) were official sponsors.
But in those cases, it hard to say how much the World Cup moved the needle on quarterly results. After all, it’s tough to measure the effects of using the Cup to sell more solar panels.
Other companies, however, spelled out what the World Cup meant for them. These are the names where its important to remember that the World Cup was an exception, not the rule.
Here a five companies whose earnings were swayed by the World Cup:
Buffalo Wild Wings (BWLD) beat Wall Street’s profit and revenue estimates. Partly, that was due to a long NHL playoff season, the NBA playoffs and the Final Four, but the World Cup was put BWLD over the top. As CEO Sally Smith said in a press release:
“With the 2014 World Cup, we had an opportunity to showcase the brand and capture sales from the growing U.S. soccer audience. Sales during the tournament were robust, contributing [1 percentage point] to our company-owned same-store sales increase for the quarter.”
The World Cup extended into the current quarter, where it boosted same-store sales at company-owned locations by another 3.3 percentage points.
If BWLD has a hard time beating those same-store sales figures next year, don’t forget how much the World Cup helped in 2014.
Twitter (TWTR) was an undisputed World Cup winner, as quarterly results clobbered Street estimates and renewed faith in the stock.
Revenue more than doubled year-over-year, while the average number of users grew 6% quarter-over-quarter. Twitter specifically tailored itself for the games and fans as the Cup progressed.
Said CEO Dick Costello on a conference call with analysts:
“During the World Cup, we delivered the kind of events experience that I’ve wanted to see from us for some time.”
But Twitter doesn’t want the World Cup to get too much credit. Indeed, it took pains to convince the Street that the World Cup didn’t drive the user growth. That’s because it can’t afford the World Cup to be seen as a one-off. But future reports will almost surely confirm that it was.
Herbalife (HLF) missed Wall Street’s earnings estimate for the first time in 22 months, hurt by a number of factors, including costs for defending itself against the accusations of billionaire Bill Ackman.
Almost lost in the noise was weak performance its critical South American market. As CFO John Desimone said on a conference call with analysts:
“We believe that softness in the quarter was due in part to an economic slowdown as a result of Brazil hosting the World Cup and the impact that has on Nutrition Club attendance.”
In other words, Herbalife distributors and consumer were too distracted by the world cup to get any work done or follow the program.
Herbalife has plenty of bigger issues to deal with, but if it’s still around this time next year, it will come up against some easy comparisons.
Effects from the World Cup were found all over Nike’s (NKE) most recent earnings, touching everything from revenue to costs. This official sponsor of the World Cup made heavy investments in the tournament — and they sure did pay off.
Revenue grew 11% to $7.43 billion, helped by product launch promotions and investment in World Cup-themed commercials. Both the top and bottom lines beat analysts’ estimates, even after huge cost increases tied to the World Cup. Indeed, selling, general and administrative costs ballooned by more than 20%.
The afterglow of the World Cup will boost Nike in the quarters to come, too. Global orders for future delivery jumped 11% for the period ending in November.
Just remember that Cup effects will inevitably fade — and it only comes once every four years.
Nike may own every other sport in the world, but Adidas (ADDYY) owns soccer. The German victory in the world cup only solidified the company’s standing.
Adidas wasn’t just an official sponsor of the World Cup; it was an official supplier. As CEO Herbert Hainer told the press:
“The brand’s presence on the field of play and all around the tournament in Brazil as well as the success of our marketing campaign in social media worldwide is clear proof that Adidas is and will remain the leading football brand.”
Adidas said it will definitely hit its goal of $2.7 billion in sales at its soccer category this year. Soccer ball sales are expected to grow to 14 million from 13 million for the 2010 World Cup. And sales of the German team’s jersey are through the roof.
Too bad ADDYY stunned investors when it cut its growth target for the year, hurt by currency — and World Cup marketing costs. As disappointing as that was for investors, at least it sets ADDYY up for easy comparisons next year.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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