Nike

Nike Selling Umbro, Cole Haan Brands To Focus On Growth Of Nike, Other Sport Brands

Published June 1, 2012

Nike Thursday announced its intention to divest two of its wholly-owned affiliate brands -- Cole Haan and Umbro -- to turn its focus on driving growth in the Nike, Jordan, Converse and Hurley brands. Nike President & CEO Mark Parker said in a statement, "Divesting of Umbro and Cole Haan will allow us to focus our resources on the highest-potential opportunites for Nike, Inc. to continue to drive sustainable, profitable growth for our shareholders." The process of divesting the two will begin immediately and is expected to be complete by the end of Nike's FY '13 (Nike). The WALL STREET JOURNAL's John Kell noted these are Nike's "first planned divestitures in roughly four years." Financial terms and potential buyers "weren't named." Nike bought Umbro in '08 for $565M. Umbro and Cole Haan "make up a relatively small portion" of Nike. Both brands are "listed under 'other businesses' along with Hurley, Nike Golf and Converse, contributing roughly" 13% to Nike's $17.7B in sales for the first nine months of the latest fiscal year. The sale of Umbro "suggests to some that Nike believes the namesake soccer line is well positioned to court consumers." Nike last "unloaded an individual brand, Bauer Hockey, in April 2008," shortly after it sold off Starter in late '07 (WSJ.com, 5/31).

TIMING IS EVERYTHING: In Portland, Allan Brettman writes, "While the decision to sell appeared to make sense, the bigger question may be why the company acquired either Cole Haan or Umbro in the first place." Prior to buying Umbro, Nike's "presence on the greater soccer pitch had been viewed with some skepticism." Sterne Agee analyst Sam Poser said, "Umbro was a good idea before they had fully developed the Nike soccer business. Now that they've fully developed Nike soccer, Umbro detracts from their business." Brettman writes the timing of the Umbro announcement "is curious as one of the two major sporting events of the summer -- the European Football Championship -- will get underway next week." Nike "has been building anticipation for both with major marketing campaigns; how Umbro figures into the mix remains to be seen" (Portland OREGONIAN, 6/1). Susquehanna Financial Group analyst Chris Svezia said, "They really haven't done the best job on execution with acquisitions. Nike bought Umbro at the peak of the market, they've already taken a writedown, it's not a profitable business, so why bother keep throwing money at it? They are looking to cut their losses and move on." BLOOMBERG NEWS' Matt Townsend noted the Umbro acquisition "took a wrong turn, about a month after it was announced, when the England national soccer team failed to qualify for the 2008 European Championships finals, causing a decline in sales." Umbro "has the sponsorship" through '18 and Nike "declined to comment on the future of its relationship with England." SportsOneSource analyst Matt Powell said that Nike "never figured out how to make Umbro into more than a middle-tier brand." Umbro and Nike also "competed against each other because they had many overlapping products" (BLOOMBERG.com, 5/31). Nike said that its decision "was not in response to an announcement in April by Adidas, which said it planned to drop a quarter of its products to improve profitability" (AJC.com, 5/31).