Sneaker Companies Offering “Blank Checks” to AAU Programs Run by Parents of Star Players


The Oregonian released a piece worth reading, detailing how sneaker companies skirt NCAA regulations by sponsoring grassroots teams run by the family members of top prospects. Sponsors are permitted to provide shoes, uniforms and cash for under-funded travel to teams; but, the story describes a system where Nike, Adidas and Under Armour are targeting the family members of star prospects who control their own programs, offering a “blank check” for their allegiance. The cash being pocketed by the family (it’s alleged Josh Jackson’s mom gets $10,000 mo.) equates to a “direct endorsement” of the player, an “extra benefit” that theoretically would make a prospect ineligible under NCAA guidelines. Of course, the sneaker companies are writing these checks, are doing so for good reason; an analysis of 2017 NBA first round picks indicated that most players signed professional shoe deals with the company who sponsored their grassroots team(s).

Howie Long-Short: Basketball sneaker sales have fallen off a cliff in the last 24 months, down 26% to $950 million. Nike (NKE) controls 80% of the market, with Under Armour (UAA) in a distant 2nd place (12.1%). Adidas (ADDYY) accounted for less than 5% of all U.S. basketball sneaker sales in ’17; but, Mark King, the President of Adidas Group North America, has said the brand will “focus on improving its basketball products this year.”

Fan Marino: The NCAA has never investigated the Bagley case, but the circumstances appear to be particularly questionable. In 2008, the Bagley’s filed for Chapter 7 bankruptcy; claiming a household income of $44,000. Four years later, shortly after Nike sponsored the Phoenix Phamily (the team Bagley III played on, coached by Marvin Jr.), the Bagley’s moved into a California home estimated to be worth between $750,000-$1.5 million; with rent in the area ranging from $2,500-$7,500/mo. The elder Bagley readily acknowledge he was using Nike money to “make ends meet.” That’s not great news for Duke fans. In 2010, Renardo Sidney (Mississippi State) was declared ineligible after it was found his family received “preferential treatment” from Reebok. It was later announced Reebok had signed Sidney’s father to a $20,000/year consulting agreement. Duke is headed to the Sweet 16, but their appearance very well may be vacated at a later date.

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Adidas Increases 2020 Profitability Outlook, Announces Share Buyback Plan

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Adidas (ADDYY) released its Q4 ’17 earnings report and while the company missed analysts’ revenue expectations, it reported top line growth (+16% YOY) and bottom line growth (+32% YOY) that left CEO Kasper Rorsted “extremely happy with the results.” The company expects to continue growing sales (+10%) and profits (+13%-17%) in 2018, albeit at a slower rate. On Wednesday’s earnings call, Rorsted also announced that the company had raised its 2020 profitability outlook to 11.5% and announced a plan to buyback $3.72 billion worth of shares (+/- 9%) by ’21; news that sent ADDYY’s share price up +9.4% ($116.80) by the days’ close.

Howie Long-Short: Adidas sales were up 35% YOY in fiscal 2017, enabling the company to surpass Jordan Brand in U.S. sneaker sales (and Under Armour in apparel sales). ADDYY now holds the #2 spot in the category behind NKE. How did that happen? As UAA and NKE focused on basketball sneakers (-20% in ’17), ADDYY built a pipeline of desirable lifestyle sneakers (Superstar, NMD, Stan Smith). Simply put, they’re producing a quality product desired by the consumer.

Fan Marino: Fun fact: Adidas sold 1 million pairs of sneakers in 2017 that were constructed from plastic found in the ocean. The Ultraboosts, each reusing 11 plastic bottles, were created in collaboration with Parley for the Oceans (an environmental organization).

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The Fiscal Value of a Historic Upset in NCAA Tournament

March Madness

Yahoo! Sports (AABA) studied the financial impact of a low-major upsetting a top 3 seed in the NCAA tournament; using Lehigh (15 seed, beat Duke, ’12), Florida Gulf Coast (15 seed, beat Georgetown, ’13), Georgia State (14 seed, beat Baylor, ’15) and Middle Tennessee (15 seed, beat Michigan State, ’16) as subjects in their case study. Following historic wins, all 4 schools experienced an increase in freshman enrollment (+ 28.5% in applications, GSU), increased media exposure during the tournament ($346,000 worth, FGCU), a bump in merchandise sales (+ $500,000 YOY) and a flood of alumni donations (+ $454,000 YOY, Lehigh). Ultimately, Yahoo! Sports was unable to put a definitive value on a monumental upset (too many variables); but, they found that the figure was significant enough, that the schools have chosen to “reinvest millions in pursuit of another.”

Howie Long-Short: An increase in freshman enrollment is the most valuable of the benefits a Cinderella story receives. At Georgia State, Georgia residents pay just shy of $6,000/semester; while out of state students pay just over $15,000/semester. The school’s acceptance rate increased 17.4% in the fall of 2016, bringing the total number of students to 50,000. For the sake of round numbers, we’ll assume they added 7,500 students that fall. Even if they were all in-state students, the school is generating an extra $45 million/semester. No wonder school officials agreed to build the men’s basketball team a new training facility!

Fan Marino: Of course, the longer a team remains in the tournament, the more exposure its sneaker and apparel provider will receive. Nike (NKE) has the best chance to place a team in the Final Four, 70% of the 68 teams that were selected are sponsored by the company. Under Armour (11) and Adidas (9) also have a chance to reach San Antonio; Russell Athletic is going to need a miracle; their only squad in the dance is the Texas Southern Tigers. It must be noted Texas Southern won their play-in game over North Carolina Central 64-46.

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Arsenal F.C. Signs Largest Sponsorship Deal in Club History

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Emirates will remain the shirt (and training kit) sponsor for Arsenal F.C. (and all affiliated teams) through ’23-’24, signing a deal worth “in excess of” $56 million/year; the largest sponsorship deal in team history. The English futbol club and the Dubai based airline maintain the longest running shirt partnership in the EPL (it dates back to ’06). Arsenal will reportedly supplement the new deal with a sponsor on the sleeve of their uniform; a first for the club. It should be noted that Emirates also owns the naming rights to the club’s north London stadium through ’28; acquired in a prior transaction.

Howie Long-Short: While not exactly an apples to apples comparison, as La Liga/EPL shirts have corporate logos across the chest and NBA jerseys contain just a small corporate logo patch, there is a drastic difference in the revenue generated from uniform sponsorships between the leagues. The most lucrative NBA patch deal is a 3-year $60 million agreement between Rakuten (RKUNY) and the Golden State Warriors. RKUNY is paying nearly 3x the amount (annually), over a longer period ($58 million/year, 4-years), to be the shirt sponsor for F.C. Barcelona. MANU has the most lucrative jersey sponsorship deal in futbol, valued at $74 million/year (7 years).

Fan Marino: GumGum Sports is reporting that jersey sponsors maintain the best signage placement within NBA games (except for the league’s apparel provider, NKE) and that the brands participating in the 3-year pilot program, are receiving a significant return on their investment. The sports media valuation company estimates that participating brands will see at least $350 million in social media exposure alone; noteworthy when you consider there are just 30 NBA teams, not everyone has a jersey sponsor and most companies are just +/- $5 million/year. GumGum determined that Goodyear (GT, Cavs), RKUNY (Warriors) and General Electric (GE, Celtics) received the greatest ROI from the 1st half of the 2017-2018 NBA season.

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Under Armour Shares Spike 17%, International Growth More Than Off-Sets Declining North American Sales


Despite declining revenue in North America (-4.5% to $1.02 billion), Under Armour (UAA) announced Q4 ’17 revenue increased 4.6% to $1.37 billion; buoyed by a 47% increase in overseas business (23% of total sales). On Tuesday’s earnings call, CEO Kevin Plank said the company anticipates ’18 sales will continue to grow in the low single-digits; while announcing an expanded restructuring plan ($110-$130 million pre-tax, on top of the $85 million booked last year), projected to save the company at least $75 million annually beginning in ’19. UAA lost $87.9 million in Q4 ’17, following a one-time expenditure related to the new tax laws and $36 million in restructuring charges (i.e. facility terminations, severance costs); on an adjusted basis, the company lost just $579,000.

Howie Long-Short: UAA’s 4th quarter wasn’t overwhelmingly successful, but it did beat analyst expectations ($1.37 billion vs. $1.31 billion) and that was enough for investors as shares climbed 17.36% on Tuesday; closing the day at $16.70. Moving forward, Plank sees “footwear (+9.5% in Q4 ’17), women’s and international (projecting +25% in ’18)” sales driving growth. Of course, he’ll have some competition with NKE looking to grow abroad too; projecting a $15.6 billion increase (to $50 billion) in revenue by 2020, with 75% of that growth expected to come from overseas markets.

Fan Marino: Sneaker brands release limited edition colorways to showcase their signature lines on All-Star weekend (2.16-2.18). Under Armour has unveiled the Steph Curry 4 “City of Angels” (on sale on 2.16, $130), the sneaker the Golden State star will wear as he leads his hand-picked squad against Team LeBron. James will wear the LeBron15 “All-Star”, a colorway inspired by the Hollywood Walk of Fame.

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Fanatics Announces American Express Jersey Assurance Program, Protects Fans from Free- Agency, Trades

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Fanatics announced the launch of the American Express (AXP) jersey Assurance program; enabling NBA fans who purchase a player jersey with an American Express card, within the Fanatics network (including,, to exchange said jersey if the player leaves the team (due to free agency or a trade) within 12 months of purchase. AXP has taken the initiative to back both Fanatics existing program (90 days) and to extend the protection (for those who purchase with an AMEX), offering fans the confidence required to spend $250 for a new authentic Nike (NKE) jersey; knowing unforeseen changes could occur at any time before, during or after the season. Should a player relocate (and over 100 are free agents in ’18), fans will have the option to trade their existing jersey for a model on their new team or another player on the existing team.

Howie Long-Short: The NFL bought 3% of Fanatics in May 2017 for $95 million, at a $3.17 billion valuation; which was more than 2x its revenue at the time. Noteworthy, as retailers Dick’s Sporting Goods (DKS) and Hibbett Sports, Inc. (HIBB) currently have market caps ($3.72 billion, $498 million) worth roughly half of what they generated in 2017 sales ($7.92 billion, $973 million). That’s of no concern to NFL owners though, one was quoted as saying he could see the Fanatics growing “anywhere from 8-10x”.

Fan Marino: If you’re requiring usage of a jersey assurance program, you’re doing it wrong; you must take the player’s potential longevity with the team in to consideration. Look for guys that will retire with the franchise or a rookie with star potential, not a journeyman! From October-December, the league’s Top 10 most popular jerseys were; Curry, James, Durant, Antetokounmpo, Porizingis, Embiid, Westbrook, Simmons, Leonard and Harden. Only those with a recently purchased James jersey (and maybe Leonard) need to worry about holding on to their receipts. I do need to point out though, that during the ’16-’17 season, 5 players with Top 8 most popular jerseys were traded or free agents (Irving, Wade, Butler, Rose and Anthony).

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New F1 Logo Likely Infringing on 3M Trademark


The new F1 (FWONK) logo, created by Wieden & Kennedy (created Just Do It for NKE), may be infringing on a pan-European trademark (and potentially trademarks in 10 other countries) registered to 3M (MMM). The new logo representing a “race track”, looks eerily like the logo used by Futuro (compression tights) to represent a “stylized knee joint”. The purpose of the FWONK rebrand, which cost an estimated $1 million, was to create a logo that would be optimized for digital platforms and merchandising; with the intention of launching the new clothing line at the season opener in March, a plan that may now need to be altered. 3M has not yet opposed FWONK’s trademark registration, but is “looking in to this matter further.”

Howie Long-Short: 3M (formerly Minnesota Mining & Manufacturing Company) owns Scotch tape, Scotch-Brite and Post-It Notes (among others); and sells more than 55,000 products. In 2016, the company generated $30.1 billion in revenue; 17x what FWONK brought in. FWONK could pay MMM for the rights to continue using the logo, but that decision would likely draw pushback from the teams; as the expense would reduce their prize pool. Alternatively, FWONK could choose to use one of the other 2 logos it applied for trademarks on; or simply revert to the old logo (the fan choice).

Fan Marino: F1 fans may not love the new logo, but they should be excited about David Hill participating in the production of F1 race broadcasts. Hill “will oversee the graphics package and the way the race is televised”. Fans may not recognize Hill’s name, but if they watch the NFL on Fox they’ll recognize some of his work; including the score bug and first-down graphics. He’s also credited with launching Fox Sports, building the Fox Sports network of RSNs (recently sold to DIS) and won an Emmy for producing the 2011 World Series. Great hire!

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