One of the biggest sports world upsets this week wasn’t on the field.
The National Football League on Tuesday announced it had awarded the contract for uniforms and fan apparel to Beaverton, Ore.-based Nike beginning in 2012, according to an NFL statement. Reebok, a division of rival German athletic company Adidas, had held the rights to NFL apparel since 2001.
“We have spent considerable time the past few years rigorously evaluating our apparel business,” Eric Grubman, EVP of NFL ventures and business operations, told Footwear News by e-mail. “The new framework will provide fans with a wider breadth of merchandise from global category leaders in the sports licensed apparel industry.”
Terms of the deal were not disclosed, although several analysts suggested that Nike’s final bid for a five-year contract was significantly more than the price Reebok paid for its 10-year assignment.
Citigroup’s Kate McShane estimated that sales of NFL product represents $350 million in revenue for Reebok — more than 60 percent of its $565 million U.S. apparel business, she wrote.
Matt Powell, an analyst at SportsOneSource, put the number even higher, telling FN he estimated NFL products were worth about $500 million in sales.
“This is huge loss for [Reebok],” he said.
Sam Poser, an analyst with Sterne Agee, agreed that the end of the agreement would represent lost sales to Reebok, but added that with more than a year before the contract’s expiration, the company would have time to form a plan to recoup the loss.
Reebok parent Adidas seems to have been prepared for the potential outcome. Late last month, Adidas CEO Herbert Hainer told CNBC in an interview that the firm would try to keep the NFL as a property within the Adidas organization, but it was not a priority. “If somebody bids higher than us, then we’ll accept that. … We have very strong league relationships. So if we lose the NFL, it won’t make or break our company.”
For his part, Nike brand president Charlie Denson told FN by e-mail that his company was bullish on the new deal. “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,” he said.
The contract for game uniforms, training apparel, sideline apparel, base-layer and fan wear builds on Nike’s existing agreements for NFL footwear and gloves, as well as marketing rights.
But Poser said the biggest effect of the deal as a whole would be to boost Nike’s image. “This is a good thing, and a great marketing tool for Nike,” he said. “And if they can make money from it, great.”