Nike intercepts NFL uniform deal from Reebok
Terms of the deal between the NFL and the sports apparel company based near Beaverton weren disclosed, but CNBC reported it was for five years. Reebok has held the on field uniform rights for the past decade.
“We believe our agreement with the NFL enhances the Nike brand, and provides a significant opportunity to drive growth across the business both in our performance products and sportswear,” Charlie Denson, president of Nike Brand, said in a statement.
The agreement the NFL announced in Chicago, which also allows Nike to provide fan apparel, involves six other apparel partners for gear ranging from team caps to kids clothes.
Reebok is not among them, but will remain the league official outfitter through the 2011 12 season.
, which maintains its North American headquarters in North Portland, owns Massachusetts based Reebok.
Given Nike strong identification to the NFL through its partnerships with individual players Adrian Peterson of the Minnesota Vikings, Drew Brees of the New Orleans Saints, Troy Polamalu of the Pittsburgh Steelers and the rest why would the company shell out big bucks for an overall licensing deal?
“Even though Nike has not had the apparel contract,” said Reed Anderson, research analyst of D. A. Davidson Co., “they still the most visible brand on the field.”
Indeed, look at the feet, where the Swoosh is prevalent. Or the hands, where Nike has on field exposure rights for its football gloves. Or the Nike football commercials between television breaks.
“They still extremely relevant already,” said Anderson.
But Anderson and other stock analysts who follow Nike liked Tuesday deal because it fits with the company overall branding strategy, because the company has billions in spending money and, not to be forgotten, because Reebok was holding onto the prize.
An Adidas subsidiary, Reebok CCM Hockey, is official outfitter of the NHL, in addition to the Champions Hockey League, the American Hockey League, the Canadian Hockey League and the ECHL (formerly the East Coast Hockey League).
Majestic Athletic of Easton, Pa., holds the license as official on field uniform provider as well as supplying teams with outerwear, batting practice jerseys, T shirts, shorts and fleece. New Era holds the license as official on field cap.
“This is very much in line with their strategy to tie into professional sports groups,” said Erin Ashley Smith, a stock analyst with Argus Research Corp.
She anticipates that Nike will introduce more professional level NFL gear into retail shops, a prediction based in part on a presentation Nike officials made to analysts earlier this year.
It a guess as to how much Reebok will lose as a result of Tuesday announcement and how much Nike will gain. apparel revenues.
McShane analysis estimated the added revenue could add 9 cents per share, or 2 to 3 percent, in earnings for Nike stock in the first year of the NFL apparel deal.
## ## Shares of Nike have been posting new 52 week highs in the past few weeks and Tuesday was no different as share hit $83.40 before slipping back to close down 9 cents at $81.89.
An important number to Christopher Svezia, an analyst with Susquehanna Investment Group, is
Nike available cash: more than $4.5 billion.
“There a strategy behind it,” Svezia said, “but maybe they did it because they can.”
Also, the deal “keeps it out of the hands of a competitor,” such as Reebok or upstart Under Armour.
While details of the NFL bids are private, Svezia said Reebok likely participated and set a price ceiling with the attitude that, “if there a higher bid, then so be it.”
Reebok issued a statement Tuesday saying it has enjoyed its partnership with the NFL and noted that NFL licensed sales have more than doubled during its tenure.