MarkDaMan
10-24-2007, 03:57 PM
Nike strikes deal for British soccer brand
Sports - The purchase of Umbro is timed ahead of the next World Cup to help Nike to its goal of dethroning Adidas
Wednesday, October 24, 2007
BRENT HUNSBERGER
The Oregonian
Nike took another shot at rival Adidas' soccer supremacy Tuesday, announcing it would buy British football brand Umbro for $582 million cash.
The move essentially would pair the world's largest athletic wear maker with one of the world's largest soccer brands, one that has a solid footing on Adidas' European home turf. One footwear market expert predicted the deal, expected to close next spring, could push Nike past Adidas AG as soccer market leader in several European countries for the first time.
"It allows them to authentically gain market share instantaneously," said Marshal Cohen, chief industry analyst with The NPD Group Inc., a retail-tracking firm. "It basically will catapult them to the top in most countries and in some put them at the top."
Umbro is more than 80 years old, based in the world's largest soccer market of Britain, and outfits the popular English national soccer team and more than 140 club and national teams worldwide. Nike Chief Executive Mark Parker likened the purchase to the company's 2003 acquisition of Converse Inc. Umbro's apparel-heavy product line and endorsements complement Nike's expertise in footwear and sports-marketing deals with the likes of soccer giant Ronaldinho.
"This move from Nike should not take anyone by surprise," Parker told analysts Tuesday.
The deal also edges Nike toward its goal of adding $7 billion to its $16 billion annual revenue by 2011, Parker said. Umbro's direct-sales and licensed-product business totaled $755 million last year. Growth and purchases of affiliate brands are projected to make up one-quarter of the Nike sales growth, Parker said, even as it looks to sell its Nike Hockey Bauer Corp. unit.
Goal for World Cup
Nike, based near Beaverton, also has a goal of dethroning Adidas as soccer king by the 2010 World Cup. Earlier this year, the company offered the German soccer federation nearly $100 million a year to outfit the national team in Adidas' own home turf. But Adidas secured the contract.
Parker pledged to increase Umbro's revenue over several years, much as it has done with Converse. Like Converse, it will operate Umbro as a stand-alone brand, leaving its headquarters in Cheadle, U.K.
Analysts applauded the move, saying Nike should be able to use its shoemaking expertise to expand Umbro's cleated and indoor soccer line. Currently 70 percent of Umbro's sales come from jerseys and other soccer apparel.
"Nike has been very successful at integrating acquisitions and growing brands over the last several years, with Converse as the most recent example," wrote analyst Kate McShane of Citigroup Global Markets, which has done investment banking work for Nike. McShane rates Nike a buy with a price target of $67 a share. Nike shares closed Tuesday at $64.12, up 95 cents, on the New York Stock Exchange.
"It's clearly going after Adidas and their existing market penetration throughout Europe," said Christopher Svezia, an analyst with Susquehanna Investment Group, which does not own Nike shares or do business with the company. "Over time, it makes sense. And that's the key word: over time."
Umbro's earnings down
In the short term, Umbro faces several challenges. Earnings declined nearly 40 percent in the first six months of 2007, compared with the same period last year, when the World Cup drove sales of Umbro's English team soccer jerseys and shorts, called "kits." Umbro's sales normally drop in years when the European and World Cup soccer championships aren't in play.
Earlier this month, the English soccer team lost a qualifying match to Russia, jeopardizing its chances of playing in the Euro 2008 soccer championships. Analysts fear Umbro earnings could fall significantly if England doesn't make the cut.
Parker said Nike plans to address the ups and downs of Umbro's reliance on English team kit sales.
"We think, like Nike, there's tremendous growth opportunity in emerging markets," Parker said. "We're very committed to working with Umbro to more effectively impact their business."
The deal also underscores Nike's growth prospects outside the United States and in soccer, the world's most popular sport. During its first fiscal quarter ended Aug. 31, Nike's sales grew in Europe, Asia and the Americas outside the U.S. by double digits but by only 2 percent in the States.
Nike executives said the acquisition would not have an immediate impact on earnings, particularly since the deal won't close until late in its fiscal 2008, which ends in late May.
U.S. soccer fans probably aren't as familiar with Umbro as the rest of the world, in part because the company lacked a significant presence in the $140.5 million U.S. soccer footwear market. Five years ago, "we couldn't get Umbro product," said Jason Clute, manager of The Far Post Soccer Supply Co. in downtown Portland. "Only recently have they gotten back in the U.S. market."
In an area that is home to headquarters of both Nike and Adidas North America, The Far Post sells few Umbro products, though its $80 English soccer team kits are relatively popular, Clute said. The store takes a pass on carrying Umbro shoes priced higher than $100 because they can't compete with higher-priced Adidas or Nike models.
"With Umbro, it's kinda hard," Clute said. "They don't really have a lot of the mainstream athletes behind a lot of their products. They're more of a U.K. brand, and they focus on that."
Brent Hunsberger: 503-221-8359; brenthunsberger@ news.oregonian.com; blog.oregonlive.com/playbooksandprofits
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1193196344151520.xml&coll=7
Sports - The purchase of Umbro is timed ahead of the next World Cup to help Nike to its goal of dethroning Adidas
Wednesday, October 24, 2007
BRENT HUNSBERGER
The Oregonian
Nike took another shot at rival Adidas' soccer supremacy Tuesday, announcing it would buy British football brand Umbro for $582 million cash.
The move essentially would pair the world's largest athletic wear maker with one of the world's largest soccer brands, one that has a solid footing on Adidas' European home turf. One footwear market expert predicted the deal, expected to close next spring, could push Nike past Adidas AG as soccer market leader in several European countries for the first time.
"It allows them to authentically gain market share instantaneously," said Marshal Cohen, chief industry analyst with The NPD Group Inc., a retail-tracking firm. "It basically will catapult them to the top in most countries and in some put them at the top."
Umbro is more than 80 years old, based in the world's largest soccer market of Britain, and outfits the popular English national soccer team and more than 140 club and national teams worldwide. Nike Chief Executive Mark Parker likened the purchase to the company's 2003 acquisition of Converse Inc. Umbro's apparel-heavy product line and endorsements complement Nike's expertise in footwear and sports-marketing deals with the likes of soccer giant Ronaldinho.
"This move from Nike should not take anyone by surprise," Parker told analysts Tuesday.
The deal also edges Nike toward its goal of adding $7 billion to its $16 billion annual revenue by 2011, Parker said. Umbro's direct-sales and licensed-product business totaled $755 million last year. Growth and purchases of affiliate brands are projected to make up one-quarter of the Nike sales growth, Parker said, even as it looks to sell its Nike Hockey Bauer Corp. unit.
Goal for World Cup
Nike, based near Beaverton, also has a goal of dethroning Adidas as soccer king by the 2010 World Cup. Earlier this year, the company offered the German soccer federation nearly $100 million a year to outfit the national team in Adidas' own home turf. But Adidas secured the contract.
Parker pledged to increase Umbro's revenue over several years, much as it has done with Converse. Like Converse, it will operate Umbro as a stand-alone brand, leaving its headquarters in Cheadle, U.K.
Analysts applauded the move, saying Nike should be able to use its shoemaking expertise to expand Umbro's cleated and indoor soccer line. Currently 70 percent of Umbro's sales come from jerseys and other soccer apparel.
"Nike has been very successful at integrating acquisitions and growing brands over the last several years, with Converse as the most recent example," wrote analyst Kate McShane of Citigroup Global Markets, which has done investment banking work for Nike. McShane rates Nike a buy with a price target of $67 a share. Nike shares closed Tuesday at $64.12, up 95 cents, on the New York Stock Exchange.
"It's clearly going after Adidas and their existing market penetration throughout Europe," said Christopher Svezia, an analyst with Susquehanna Investment Group, which does not own Nike shares or do business with the company. "Over time, it makes sense. And that's the key word: over time."
Umbro's earnings down
In the short term, Umbro faces several challenges. Earnings declined nearly 40 percent in the first six months of 2007, compared with the same period last year, when the World Cup drove sales of Umbro's English team soccer jerseys and shorts, called "kits." Umbro's sales normally drop in years when the European and World Cup soccer championships aren't in play.
Earlier this month, the English soccer team lost a qualifying match to Russia, jeopardizing its chances of playing in the Euro 2008 soccer championships. Analysts fear Umbro earnings could fall significantly if England doesn't make the cut.
Parker said Nike plans to address the ups and downs of Umbro's reliance on English team kit sales.
"We think, like Nike, there's tremendous growth opportunity in emerging markets," Parker said. "We're very committed to working with Umbro to more effectively impact their business."
The deal also underscores Nike's growth prospects outside the United States and in soccer, the world's most popular sport. During its first fiscal quarter ended Aug. 31, Nike's sales grew in Europe, Asia and the Americas outside the U.S. by double digits but by only 2 percent in the States.
Nike executives said the acquisition would not have an immediate impact on earnings, particularly since the deal won't close until late in its fiscal 2008, which ends in late May.
U.S. soccer fans probably aren't as familiar with Umbro as the rest of the world, in part because the company lacked a significant presence in the $140.5 million U.S. soccer footwear market. Five years ago, "we couldn't get Umbro product," said Jason Clute, manager of The Far Post Soccer Supply Co. in downtown Portland. "Only recently have they gotten back in the U.S. market."
In an area that is home to headquarters of both Nike and Adidas North America, The Far Post sells few Umbro products, though its $80 English soccer team kits are relatively popular, Clute said. The store takes a pass on carrying Umbro shoes priced higher than $100 because they can't compete with higher-priced Adidas or Nike models.
"With Umbro, it's kinda hard," Clute said. "They don't really have a lot of the mainstream athletes behind a lot of their products. They're more of a U.K. brand, and they focus on that."
Brent Hunsberger: 503-221-8359; brenthunsberger@ news.oregonian.com; blog.oregonlive.com/playbooksandprofits
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1193196344151520.xml&coll=7
