Adidas to Replace Puma as Arsenal Kit Manufacturer, Shares Rise +8% on Q2 Earnings

Adidas 200x200

Arsenal has agreed to a 5-year $385 million kit deal with Adidas that will replace the club’s existing pact with Puma, at the completion of this season. Adidas will pay +/- $77 million/season (beginning in ‘19) to become the official kit provider of the Gunners, double what Puma had been paying. The deal is being touted as the 3rd most valuable kit pact in the world, behind just Nike’s agreement with Barcelona ($134.5 million/season) and Adidas’ contract with Manchester United ($96 million/season).

Howie Long-Short: Adidas (ADDYY) issued Q2 earnings on Thursday, reporting group sales rose 10% YoY (to $6 billion) during the most recent quarter. North America (+16%), Greater China (+27%) and the e-commerce sector drove the growth. Perhaps ADDYY’s most impressive feat has been continuing to grow the top line without resorting to discounts; the company reported gross margins rose +2.2% (to 52.3%) in the quarter ended in June, as the company continues to sell shoes at full-price. Shares increased +8% on Thursday’s report, closing at $119.89.

Stephen Wilmot (WSJ) made a strong argument that ADDYY shares are undervalued. Even after Thursday’s 8% jump, Adidas is trading at just 23x prospective earnings; compared to Nike’s 29x. That’s despite Adidas growing sales (16% vs. 3% in U.S.) and profits faster than their rival, not having to deal with any potential #MeToo backlash or increase employee wages.

Fan Marino: The newfound revenue should give Arsenal additional cash for transfers next summer. It’s been reported that new manager Unai Emery was given just $90 million to work with during this summer’s window.

Arsenal will become the 7th Premier League team to be outfitted by the German footwear and apparel company, joining Manchester United, Leicester City, Cardiff, Fulham, Watford and Wolves.

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Author: John Wall Street

At the intersection of sports & finance.

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