SBD Global/October 25, 2012/Finance

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  • Nike To Sell Umbro For $225M To Iconix Brand Group By Year's End

    Man City keeper Joe Hart sports his Umbro kit.

    Iconix Brand Group has agreed to buy Nike’s Umbro sports apparel and footwear unit for $225M in cash, "marking the fashion brand’s second deal with the U.S. sportswear group," according to Anjli Raval of the FINANCIAL TIMES. Umbro, the U.K.-based brand that sponsors the England football team kit, will now be passed over to Iconix, the second-largest licensing company in the world, with $12B in global retail sales. Nike bought Umbro in '08 for £285M. However, Nike "failed to revive the 80-year-old football brand as it had done with Converse," and revenues fell to $224M last year from $276M in '06. Financial services company DA Davidson Analyst Andrew Burns said, “Umbro and Cole Haan were already unprofitable and excluded from Nike’s quarterly results, so I don’t think it matters to the stock. They already have over $2B of cash on hand, so the $225M won’t have an impact” (FINANCIAL TIMES, 10/24). The London DAILY MAIL reported that Iconix "could lease the Umbro name" to retailer Sports Direct. Iconix CEO Neal Cole said, ''Umbro is an exciting acquisition with more than 30 licensees in over 100 countries with a devout following" (DAILY MAIL, 10/24).

    PARTING WAYS: Nike President & CEO Mark Parker said, "Umbro has a great heritage, but ultimately, as our category strategy has evolved, we believe Nike Football can serve the needs of footballers both on and off the pitch” (THE DAILY). In Portland, Allan Brettman noted Nike recently announced it had signed England's national football team to a footwear and apparel deal. The announcement was “curious as Umbro had been the team's supplier for years, and that partnership had been perceived as one of the selling points for Umbro.” Nike announced its Umbro purchase in Oct. '07 and “completed it in '08” for $565M in cash. The purchase was the “first and only acquisition for Parker" since his appointment in '06 Credit Suisse Analyst Christian Buss noted when the Umbro and Cole Haan sales plans were announced that Umbro's revenue “declined about 19%” from $276M to $224M between ‘06 and ‘11 “because of its lesser role in the competition between Nike and adidas soccer brands” (Portland OREGONIAN, 10/24).

    STILL KICKIN' IT: In N.Y., Michael de la Merced wrote selling Umbro “will not leave the company without a presence" in the global football market: it still sells the Nike Football line of gear (N.Y. TIMES, 10/24). The WALL STREET JOURNAL’s Shelly Banjo reported Iconix “owns or licenses more than two dozen brands,” including Ed Hardy and Candies, and “had bought Starter from Nike in '07.” Nike over the past few years has been “unloading its smaller brands to focus on its namesake and Jordan brands” (WSJ, 10/24).

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  • ManU Looks For Big Increase From Nike When Renewal Talks Start In February

    ManU will be looking to negotiate Nike's biggest sponsorship deal "when they begin renewal talks over Old Trafford kit supply in February," according to Charles Sale of the London DAILY MAIL. The 13-year Nike agreement with ManU that expires in '15 is worth £303M ($486M), "plus a profit share on retail sales." ManU Chief of Staff Ed Woodward, who presides over the club's commercial operation, is looking for a "major increase" from Nike.The sports merchandise company has a "six-month window of exclusive talks" with the club. Woodward would not say "what stratospheric number" the club is chasing. But ManU is "sure to remind Nike that shirt sponsorship has risen more than six-fold in the same period," from Vodafone's £8M ($12.8M) to the £52M ($83.4M) a year from Chevrolet from the '14-15 season (DAILY MAIL, 10/24).

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  • Puma Profits Plunge 85% In Third Quarter

    Puma "is considering more short-term cost cuts in a fresh sign of the sports goods maker’s struggle for fitness amid the economic slowdown," according to James Wilson of the FINANCIAL TIMES. In "a period when its biggest contracted star -- Jamaican sprinter Usain Bolt -- shone" at the London Games, the German group’s "third-quarter net income dropped 85% after €80M ($103.5M) of restructuring charges." Further "cost-cutting measures could be put in place by the end of the year." Recently, the performance of Puma, owned by France's PPR (Pinault-Printemps-Redoute), "lagged behind that of local rival adidas, which announces earnings next month." Puma also said that "sales were slowing in China, while quarterly sales in Europe fell." Baader Bank Analyst Volker Bosse said Puma was suffering from a "weaker product perception versus its peers" but expected other retailers and consumer goods groups also to show slower sales and a "softer wording on the business outlook" in quarterly earnings (FINANCIAL TIMES, 10/24). The DPA reported that Puma's profit "dropped to €12.2M ($15.8M) in the third quarter." The company's "operating income decreased from €118.6M ($153.5M) to €19.6M ($25.4M)." Puma's "revenue increased by 6% to €892.2M ($1.15B)."  As part of its restructuring measures, Puma "will tighten its organization in Europe and merge warehouses." In addition, Puma will also adjusts its product portfolio with about 30% of its products scheduled to disappear by '15. The German company "will also reduce the number of sponsorship deals" (DPA, 10/24).

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  • Billabong Founder Merchant And Board Member Survive Calls For Sacking

    Surfwear company Billabong majority shareholder & Founder Gordon Merchant and board member Colette Paul have been re-elected to the company's board "despite calls for them to be dumped," according to Bridie Jabour of the SYDNEY MORNING HERALD. The Australian Shareholders Association had "recommended the pair be sacked" for their role in the rejection of an A$850M ($878M) takeover bid by capital management firm TPG. In proxy votes Merchant received 68.28% in favor of keeping him and 31.63% against. Paul had 68.06% in favor of her and 31.85% against. Billabong Managing Dir Launa Inman revealed that the company will "cut more stores and reduce the number of styles it sells" in a move to improve the company's bottom line. The company will close another 140 stores, "bringing the total number of shops down to 600" (SMH, 10/24).

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  • Retailer Sports Direct Reports 22% Rise In Profits, Spurred By Olympics

    Retailer Sports Direct "shrugged off last month’s executive pay dispute," and has extended "its strong summer performance into the autumn," according to Adam Jones of the FINANCIAL TIMES. The U.K.’s leading sports retailer said that sales in the nine weeks to Sept. 30 were £403M ($646M), up 18% on the same period a year earlier, aided by the acquisition of clothing brands including Firetrap. Gross profit rose 22% to £167M ($267M). The group, which is also expanding in continental Europe, said it had been buoyed by an “excellent” back-to-school season, as well as by shoppers inspired by the London Games (FINANCIAL TIMES, 10/24). REUTERS' Neil Maidment reported that retailers across the U.K. are "generally struggling as consumers' disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures." Sports Direct has "coped well, benefiting from the woes of its rivals, its value offer, a growing Internet presence, highly motivated staff due to a lucrative bonus scheme and European expansion." Shares in the firm, controlled by billionaire Newcastle United Owner Mike Ashley, closed at 404 pence on Tuesday, up 74% from a year ago. The business is now valued at around £2.5 ($4B) (REUTERS, 10/24).

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