Chelsea agreed to a "stunning" £60M ($88M)-a-year kit deal with Nike that will help the club "continue to compete at the top end of the transfer market, despite failing to qualify for the Champions League," according to Matt Law of the London TELEGRAPH. The deal with Nike is worth twice as much to Chelsea as its current £30M ($44M)-a-year sponsorship deal with adidas, "which the club last week confirmed will come to an end next season." Chelsea’s decision to part company with adidas six years early will cost the club £40M ($60M) in compensation, "but the Nike agreement makes it worth their while to get out as quickly as possible." ManU still has "the most lucrative kit deal in Europe," £75M ($110M)-a-year with adidas, but Chelsea has "landed the second-highest deal" -- at least until
Real Madrid negotiates a new agreement with either adidas or Nike. It is believed Chelsea Dir Marina Granovskaia negotiated the new Nike sponsorship, "which is the latest in the line of big commercial deals" the club has struck -- following the £40M-a-year Yokohama partnership and the £10M ($15M)-a-year training kit deal with Carabao. Chelsea refused to comment on the "lucrative new Nike agreement, but most big kit contracts usually now run for at least 10 years," which would make the deal worth a total of £600M ($878M). Doubling its kit sponsorship income will give Chelsea an extra £30M-a-year "in Financial Fair Play leeway from next summer." UEFA Financial Fair Play limits "are calculated over a three-year assessment period," with clubs currently allowed to spend around £23M ($34M) more than they earn for '15-16, '16-17 and '17-18 (
TELEGRAPH, 5/17). In London, Massoudi, Noble & Whipp reported Nike "outpaced competition from Under Armour, its fast growing but much smaller rival, after intense negotiations with Chelsea, according to a person directly involved in the talks." The deal "underscores the value Premier League clubs present to global brands, especially those with a growing commercial interest in Asia." Nike has "far more financial clout than upstart Under Armour, which has been successful with signing less well known teams or athletes that have grown to be stars." And Nike’s 11.8% net margin is far higher than Under Armour’s 5.7%, "suggesting that the company is much better positioned to absorb an expensive deal." Morningstar analyst Paul Swinand said, "Nike can afford it if a deal blows up [of this size]." Swinand added that the deal Nike is expected to sign "amounts to about 20 percent of Under Armour's operating margin" (
FINANCIAL TIMES, 5/18). BLOOMBERG's Panja & Soshnick reported Chelsea Communications Dir Steve Atkins "declined to comment on the deal" (
BLOOMBERG, 5/17).
