Blog: Nike scores with Umbro
Leonie Barrie | 24 October 2007
With one fell swoop – or should that be swoosh? – Nike has taken a giant step forward in its goal to become the world’s leading football brand by the time of the 2010 World Cup. Its GBP285m (US$582m) bid for UK football kit maker Umbro Plc gives it a 70-year advantage in the world’s leading sport and the world’s biggest football market, and firmly pitches it against its European rivals Adidas and Puma.
Not only does Oregon-based Nike see football as a key growth category, but it is also looking to expand its business in markets like Europe and Asia to offset sluggish sales at home. On this count too, Umbro is a good bet, selling its products in more than 90 countries, and sponsoring top football players, teams and leagues, including the England, Ireland, Sweden and Norway national teams. It is also the exclusive supplier for the English Football Association, the governing body for English football, and generates huge revenues by selling official replica shirts to fans.
The deal might not be as straightforward as it seems, though. Rival UK sportswear groups Sports Direct International and JJB Sports together own about 25% of Umbro – which raises the possibility of a counterbid. However, analysts say this is unlikely because it could damage the retailers’ business with Nike.
Likewise, it’s not all smooth sailing in the replica strip business. England’s white shirt is the world’s best selling replica kit, and Umbro’s fortunes are inextricably linked with the fortunes of its national team. Last month Umbro issued a profit warning after poor sales of England’s shirts, and next year’s sales would be shaken further if England fails to qualify for the forthcoming Euro 2008 Championship. However, earnings will gradually become less dependent on the success of individual teams if Nike manages to grow the international presence of its latest signing.
Nike has high hopes for Umbro. The world’s leading sports brand targets football as a key growth category, and its US$582m bid for Umbro will undoubtedly shake up the sportswear sector. Joe Ayling loo...
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