Sure, it's no less a form of advertising than a print ad, television commercial, or flyer in your mailbox. Still, sponsoring NASCAR racing teams seems a bit of a stretch when your business is anything but automotive.
Home Depot (NYSE: HD) said it will continue sponsoring the NASCAR Sprint Cup No. 20 Toyota team, which racing star Tony Stewart previously led. The company didn't say how much the sponsorship costs, but in general, NASCAR's top deals run north of $20 million to $30 million for a season. Is that money the do-it-yourself warehouse can really afford to spend? And will you really shop for a faucet-repair kit at Home Depot instead of Lowe's (NYSE: LOW) because the guys in orange sponsor a racing team? Does Home Depot think it has to do this, since Lowe's sponsors a car, too?
Plenty of other companies far removed from the track sponsor racing teams, too: Coca-Cola (NYSE: KO), Best Buy (NYSE: BBY), and Verizon (NYSE: VZ) all have their stickers plastered on cars. Aaron Rents (NYSE: RNT) still sponsors the racecar dreams of one of its executive's two sons, to the tune of $730,000 in shareholder money.
In Home Depot's case, Stewart left the Joe Gibbs Racing team and is being replaced with Joey Logano, an 18-year-old who's virtually unknown and will have to build a following. Home Depot spent a lot of money over the past decade boosting Stewart into something of a household name -- anytime you bought a soda at Home Depot, he was staring down at you from the vending machine. Now it will have to start all over again with Logano. Is it worth the cost?
Last year, the home-improvement retailer spent $31 million on advertising, a figure that included its sponsorship programs. That was down from the $40 million it spent the year before, but it still represents a serious chunk of change that the company could better spend elsewhere -- say improving its store operations.
In addition to NASCAR, Home Depot sponsors such sporting events as the Olympics and the NFL. Getting your name in front of the public is a key ingredient in driving customers to your stores. Some would probably argue that having your company name plastered on a race car is a vital pursuit. But it certainly seems like an excessive bit of vanity when sales are flagging and you're trying to rebuild customer trust in your brand.
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