Common Cents for September 7, 2018

This morning, the Bureau of Labor Statistics (BLS) released the Employment Situation report for August 2018. The sum of its parts was pretty mediocre. Yes, the economy supposedly created 201K net new jobs during the month, but the BLS revised the previous two months down by 50K. What’s more, the Household Survey, from which ‘we’ calculate the Unemployment Rate, was sort of a disaster. The Labor Force Participation and Employment to Population ratios both fell slightly. In layman’s terms, the number of people looking for work fell 469K and the number of people working dropped 423K.

You might ask: “what in the blue blazes? How can the economy create 200K jobs AND the number of people working fall by double that?” The reason is the BLS has two surveys: 1) the Establishment, which focuses on actual employers and HR departments. From this one, we get the net new jobs, and; 2) the Household, which is a canvas of individuals. Are you looking for work? Do you have a job? That sort of thing. The BLS calculates the Unemployment Rate, and the other ratios, from this household survey.

It all makes perfect sense if you have been reading the report the first Friday of every month for close to three decades. It really does. However, you know, if you haven’t, let me give you this little exchange from the movie ‘Animal House’ and you can draw your own conclusions:

Bluto: Kroger, your Delta Tau Chi name is Pinto.

Pinto: Why “Pinto”?

Bluto: [belches] Why not?

I hope that shines a little light on it. If not, let me conclude this section with this: the August jobs report was neither fish nor fowl. It certainly won’t stop the Fed from raising the overnight lending target at the end of the month, but it wasn’t terribly robust either. After reading in excess of 300 of these things in my life, I would rank this one in the back half of second quartile.

With that out of the way…

Yesterday, someone asked me my thoughts on Nike’s upcoming marketing campaign and how it might impact the company’s performance moving forward. Actually, several people have asked me this, and I have to provide the following disclosures: I do not personally own Nike stock. Oakworth Capital Bank (Oakworth) holds Nike stock in some client portfolios. However, Nike is not currently part of Oakworth’s core portfolio strategies, and it is currently not a significant holding across the system. Oakworth is neither an active buyer or seller of the security and it does not ‘make a market’ on the stock or present itself as an expert on it.


Unless you just don’t consume much news, or any news at all, you have probably read Nike is using former NFL quarterback Colin Kaepernick as a part of its upcoming marketing campaign. Unless you have been on an extended leave of absence of some variety, you probably know Kaepernick was the first NFL player to kneel during the national anthem prior to games to protest racism and police brutality against minorities. His actions started something of a trend which has been the subject of much heated debate and near endless discussion. At the end of the day, the heart of the matter is whether the national anthem before a sporting event is an appropriate venue/time for a societal protest.

I will let you in on a little secret: if I have the luxury of watching the NFL on Sunday afternoon, I am relaxed and have nothing better else to do. So, I am going to take a nap, and am probably not in Nike’s desired segment anyhow.

As you may or may not know, Kaepernick’s career as an NFL quarterback has, well, fallen on tough times. As I type, he is not on a team, and has taken legal action against the NFL for what he believes is collusion by the owners to keep him out of the league. While I don’t know anything about that, what I can tell you he had a couple of really good years at the start of his career, even leading the San Francisco 49er’s to the 2013 NFC Championship where they lost to the Seattle Seahawks.

After 2013, he played in 37 games from 2014-2016, starting 35 of them. His record as a starter over this time was a less than impressive 11-24, culminating in a 1-11 record in 2016. While his individual statistics might not have been as bad as the team’s record, his overall QB rating was pretty much third quartile over that 3-year stretch. Basically, of all the quarterbacks in the NFL, by the end of 2016 Colin Kaepernick was one of them.

With that said, Kaepernick is a gifted athlete and is undoubtedly a better quarterback than some of backups currently enjoying a nice paycheck for holding a clipboard on Sunday afternoons. I don’t think that is really open for debate. So why isn’t he on a roster? Probably because no team wants a backup quarterback to be the center of attention, and, therefore, almost by definition, a distraction…regardless of the reason. Tim Tebow probably feels he resembles that remark in some way. Hey, we can all agree to disagree, right?

So, I will be blunt: Mr. Kaepernick would not be, and is not, in Nike’s upcoming marketing campaign due to his abilities on the field. Not even Nike could debate this, as the tagline for Kaepernick’s participation in said campaign will be: “Believe in something / Even if it means losing everything.” Obviously, the inference is Kap would still be in the NFL but for his protest(s) during the national anthem. However, as for his ability, well, the slogan isn’t: “Be Like Colin.”

Be that as it may, will this be successful for the company? Frankly, it already has been. When was the last time an upcoming marketing campaign for any company got this much press? Forget what the stock price did a couple of days ago; are people talking about Nike? Yeah. When was the last time YOU talked about the company? Had a strong opinion about it one way or the other? Hmm?

Unless I am completely different than a lot of folks, I think about Nike when I need a new pair of tennis shoes, and that is about the only time. Clearly, I am of a certain age, as I still refer to the things as tennis shoes. Sometimes, I might use the term running shores, but that is almost as infrequent as the number of times I actually go running. While I currently own Nike shoes, I have had New Balances, Under Armour, Adidas, and even the occasional Reeboks. I am not brand loyal in the slightest when it comes to athletic apparel or shoes. Trust me, no one is looking at me when I exercise. In fact, they are normally looking the other way.

But will the upcoming campaign influence my decision to purchase or not purchase Nike products in the future? Probably not, as the company is a known entity. We all know what the company does and what it makes. It fills a very specific, pretty small niche in my budget. So irrelevant is it to me, the company would have to do something remarkable for me to care enough about it to sway my decision-making process for new tennis shoes. You know, something completely and utterly beyond the pale…absolute heresy and that sort of thing.

Why? Because I understand Nike is in the business of, drum roll please, making a profit. To that end, its marketing department believes the upcoming campaign will drive a higher level of revenue. The company can say what it wants about freedom of speech and solidarity with Mr. Kaepernick until the cows come home. At the end of the day, it sells shoes and believes it can make a buck off the guy. It isn’t trying to solve world hunger or put people on Mars.

Further, one would have to assume the folks in marketing ran focus group surveys. They crunched their numbers. They, believe it or not, know what they are doing…or at least have run the numbers which would suggest they know what they are doing. No kidding. The company isn’t throwing this potentially confrontational campaign out there without having done its homework. At least I hope it wouldn’t.

THAT would be a better reason to disassociate yourself from the company than Colin Kaepernick’s mug on posters and a few ads on the TV. The word THAT meaning the company would be sooooo stupid as to run a major marketing campaign without testing to see whether it “will play in Peoria.” Seriously. So much so, if it offends you as to influence your decision making, you probably weren’t/aren’t in the company’s target market. In fact, you probably aren’t terribly brand loyal when it comes to athletic shoes and apparel. There are metrics for this kind of stuff.

So, how did I respond to my coworkers’ questions about how I felt about this? Pretty simple really: if Nike starts losing revenue and, importantly, market share, it will pull Kaepernick’s portion in the campaign and run with the other athletes in it. If it doesn’t, the company will stay the course. However, I can’t make this clear enough: the campaign cannot lose money and market share for the company. Period.

Cynical? Perhaps, but business is business. There are good marketing campaigns and bad ones. Regardless of how you or anyone feels about Colin Kaepernick, it remains to be seen whether Nike has a winner or a loser with this one. My guess is it is probably somewhere in the middle, as most things are. After all, the North American athletic apparel market is pretty well nigh mature, and Colin Kaepernick is but a small fraction of Nike’s overall marketing scheme despite all the furor.

As for me, I probably won’t see what all the fuss, hullabaloo, and brouhaha is about. After all, again, when I watch the NFL on Sunday afternoons, I typically do so with my eyes closed.