By Amanda Weston
Nike's ($NKE) viral ad featuring ex-quarterback Colin Kaepernick may have debuted after the most recent earnings quarter closed, but the company is already seeing results.
CEO Mark Parker said on the earnings call that the controversial ad is "driving a real uptake, I think, in traffic and engagement, both socially, as well as commercially."
It may be no surprise the company took a chance on the spot.
"They always innovate," Adam Sarhan, CEO of 50 Park Investments, said Wednesday in an interview on Cheddar. "They want to stay relevant with millennials and the younger generation because that's their bread and butter. Think of the long-term value of acquiring a customer in their teenage years and staying loyal to the brand for their entire adult life."
So far, investors don't seem to be bearing that long-term value in mind. Shares of Nike dropped as much as 3 percent early Wednesday, despite the company reporting better-than-expected earnings of $0.67 per share, up 18 percent from a year ago. Revenue increased 10 percent, to $9.9 billion. But Sarhan isn't worried.
"If you step back and look at the bigger picture, the stock was literally trading at an all-time high just yesterday, the day before," Sarhan said.
Jharonne Martis, director of consumer research at Thomson Reuters, told Cheddar Wednesday that Nike's financial success is partly driven by its smart pricing strategy.
"The product pricing is very, very intelligent," Martis said. "After they got all of the negative press, instead of offering more discounting, what they did is actually they offered less discounting and were able to sell full-price merchandise."
The Kaepernick ad may have been initially targeted to millennial consumers in the U.S., but it seemed to resonate even abroad, something Martis pointed out even took Nike by surprise.
"Even though it was U.S.-focused, and they used an NFL player here in the United States, the international crowd of millennials still resonated here with what's happening in the United States," she said.
As Sarhan explained, "The U.S. culture is exported abroad, so the whole world knows what's going on in the U.S., and when the U.S. catches a trend or does something, the rest of the world follows."
For full interview click here.