The current health concerns across the country forced postponement on March 7 of the NFL’s annual Consumer Products Summit, which had been scheduled for Tampa last week. That didn’t affect FOCO’s Michael Lewis, a longtime licensee, who had told league officials early this year that his company wasn’t going.
So early last week he was setting up his Somerset, N.J., offices of around 110 people to go completely virtual by week’s end. Even those still working in person weren’t allowed to meet face to face; it had to be virtual. His goal was that by March 16, just one person would be in the office daily — and that would be only to receive mail.
“I’ve talked to people who haven’t even thought about this yet,” said Lewis, whose roots in licensing go back decades. “Are you f’n kidding me? The sports industry is in denial. … The industry should be using this as a leadership opportunity, instead they are doing the opposite. People are living in the maybe stage, when they should be living in the inevitable and when stages.”
Said John Killen, president and CEO of licensed hard-goods giant WinCraft: “We can go remote, but we haven’t yet. There’s certainly some unknown out there, but this has always been a resilient industry. … Our manufacturing capabilities are 90% domestic, so we’re in a good position there, also.”
Somewhere between those two positions lies the rest of the sports-licensing industry. Certainly, there’s apprehension because factories have been closed for weeks in China, where many licensed sports products are manufactured. However, there’s also angst as they look out over what’s a normally predictable — but now increasingly unfamiliar — industry, since it now includes everything from games played in empty venues to the postponement or cancellation of games and events. And surely, the fear and “social distancing” prevalent in areas where the virus is widespread are not things that generally lead to the purchase of something as non-essential as a licensed T-shirt, cap, or bobblehead.
“We all have a lot of questions,” said Matt Hoffman, president of Uncanny Brands, which manufactures the popular Bleacher Creatures line of pro athlete plush, along with a variety of appliances, at nine factories in China. “Factories being closed there meant our initial shipments were delayed two or three weeks, but there’s also the impact here, which is a big unknown yet. So I would say it will be a bumpy ride, but not a terrible one. The economic slowdown here will cut demand, and we’ll have to see how many games aren’t played, but you might also see some of the business move online.”
A survey this month of more than 300 retailing executives by Digital Commerce 360 offered only an opaque answer to that question: 30.7% said ecommerce sales will be down because of coronavirus; 29.7% said ecommerce sales will increase; while 27.1% said sales will be as originally forecast.
Longtime watch licensee Adam Pennington manufactures at three factories in China for his Game Time and Artinian brands. He’s around 20% behind on supply for the many parts necessary to make watches, and he is starting to worry about sales. A few weeks back, an executive at his factory in Guangdong province assured him on a late-night Skype call to China that things were back to normal. Before cutting a check, Pennington asked if he could be shown around the facility, via laptop camera, to assure him that the factory was fully operational.
“It’s the old Reagan thing, ‘Trust but verify,’’’ said Pennington. “So that’s back to normal, but with the amount of parts that go into a watch, you get concerned about being able to reorder from across China. Without them, I can’t manufacture.”
Large athletic apparel brands including Adidas, Nike and Puma have all issued warnings that the impact of coronavirus could materially affect earnings.
“We’re not looking for it to be a banner year for a lot of brands, outside of Lysol and Clorox,” joked Paul Milone, partner at Washington, D.C., investment bank/advisory firm Symphony Investment Partners, with clients including brand consortiums Iconix and Sequential Brands. “Still, to me it looks like a fleeting blip domestically. Companies were already moving some manufacturing out of China because of tariffs. I’m looking for a slow quarter in [athletic] footwear because of delays, which isn’t small, but it’s not tragic.”
Outerstuff is the market leader in youth licensed team sports apparel, with a growing focus on the China market.@Outerstuff Instagram
Outerstuff, the market leader in youth licensed team sports apparel, does just 15% of its manufacturing in China. Accordingly, founder Sol Werdiger expressed different concerns. “China’s been developing into a very nice market for us, especially for NBA, and those stores were closed for weeks,” he said. “Domestically, I don’t have a crystal ball to tell me who will and won’t be playing. Overseas, my biggest concern is whether there will be an Olympics.”
Lewis, whose company manufactures in 37 Chinese factories, said he lost around 60 days of production and shipping time. He’s expecting things to be normalized by May, at the latest. “You know the Chinese will work around the clock to close any production gaps,” he said. “I’m not as worried about China as I am about ourselves.”
Terry Lefton can be reached at tlefton@sportsbusinessjournal.com.
