The world's largest athletic footwear company,
) recently announced that it is selling its Umbro brand to
Iconix Brand Group Inc.
) for a sum of $225 million. The company is expecting to close
the deal by the end of 2012.
In an effort to cut costs and sharpen focus on its namesake
and other brands, Nike, in May this year, first revealed the
intention of offloading its two brands - Cole Haan and Umbro. The
company has been facing a number of challenges, such as rising
labor and material costs along with uncertainty in European
economies and decelerating future orders in China due to the poor
performances of these brands. Moreover, according to Nike,
performances of these brands' do not match with that of its other
In a move to improve its soccer-related apparel and equipment
business, Nike bought Umbro in 2008 for $578 million. Currently,
the brand has more than 30 licenses in over 100 nations. However,
Nike now believes that its own brand has become much stronger and
has the capability to serve the needs of the footballers.
About Iconix Brand Group
Founded in 1978 and headquartered in New York, Iconix Brand
Group is a brand management company engaged in licensing,
marketing and supporting a diversified and growing consumer brand
portfolio by providing licenses. The company licenses its brands
worldwide through its retail and wholesale licenses for use in
connection with a broad variety of product categories, including
footwear, fashion accessories, sportswear, home products and
décor as well as beauty and fragrance, and in the case of Sharper
Image brand, consumer electronics and novelty products. Iconix
Brand Group will own 29 iconic consumer brands, after the buyout
of Umbro brand.
We believe Nike's decision to divest its two underperforming
brands will boost its bottom line. Meanwhile, in an attempt to
expand its global reach and market share, Nike is capitalizing on
growth opportunities in emerging markets, especially China. The
company is focusing on other tools, such as a direct-to-consumer
business model, to expand geographically. We believe that Nike's
continued investment in China and focus on the direct-to-consumer
business will not only help in expanding market share, but also
will facilitate strengthening its competitive position.
However, we prefer to be on the sidelines given sluggish
discretionary spending, increase in operating costs, and ongoing
We retain a long-term 'Neutral' recommendation on Nike. The
company, which competes with
Brown Shoe Company Inc.
), currently has a Zacks #2 Rank, which translates into a
short-term Buy rating.
Nike is the industry leader in the U.S. footwear and athletic
apparel industry. Over the years, the company has acquired many
well-known brands to further strengthen its leadership position.
These brands include Converse Inc., which designs, markets and
distributes athletic footwear, apparel and accessories; Cole
Haan, a leading designer and marketer of luxury shoes, handbags,
accessories and coats; Hurley International LLC, which designs,
markets and distributes action sports and youth lifestyle
footwear, apparel and accessories; and Umbro Ltd. a leading
UK-based global soccer brand.
BROWN SHOE CO (BWS): Free Stock Analysis
ICONIX BRAND GP (ICON): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
PVH CORP (PVH): Free Stock Analysis Report
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