Puma Joining Wearables Sector, Sued by Nike for Patent Infringement

Puma

Puma SE has announced it will be joining the wearables sector, signing a 10-year global licensing partnership with Fossil Group. The 2 companies will collaborate to bring Puma branded watches and smartwatches to market by the end of 2019. Fossil Group (FOSL) will design, manufacture and distribute the sport-focused line of watches, as it does for several high-end fashion labels (see: Diesel, Michael Kors). It is expected that the Fossil x Puma line will run on Wear OS (formerly Android Wear) software.

Howie Long-Short: Puma SE is a subsidiary of Kering, trading over-the-counter under the symbol PMMAF. The German athletic footwear and apparel brand reported net profit rose +36% YoY (to $82.5 million) in Q1 ’18, with sales increasing double-digits across all product categories and markets (+15.6% in U.S.). China/Asia experienced “exceptionally high growth” (+35%), while the running, training and sportstyle categories grew the fastest. In early April, with currency adjusted sales +21% YoY, PMMAF slightly increased FY18 guidance (from +10% to +10%-12%).

Puma SE’s cautious approach to entering the wearables sector (with a licensing partnership, as opposed to building their own technology) is a wise one. Both Nike and Adidas have already tried and failed, only to later sign partnerships with Fitbit (Nike) and Apple (Adidas) respectively. There’s no reason to believe Puma would have had a different result.

On a separate note, Nike is suing Puma, accusing the competitor of patent infringement in federal court. Nike alleges the unauthorized use of “Flyknit, Air and cleat assembly technologies”, related to Puma’s Ignite, The Jamming and evoSpeed SL FG products. NKE is seeking a permanent injunction and has asked that damages be awarded. Puma plans to dispute the charges and has no intention of stopping production in the interim.

Fan Marino: In other Puma news, the company announced it will become the official kit sponsor of AC Milan for the 2018-2019 season; and the official kit sponsor of Sao Paulo Palmeiras (Brazil) for the 2019 season. Those clubs join Borussia Dortmund (BORUF), Arsenal FC and the National Football Associations of Italy, Switzerland, Austria, Cameroon, Ivory Coast, Ghana, Czech Republic and Senegal in the Puma football portfolio.

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WSJ: Just 7 Ways to Publicly Invest in Sports, JWS: Not the Case

wsj-wallstreetjournal

The WSJ published a recent story asserting there are few ways to directly invest in sports, a notion we dispute. The article deemed just 7 publicly traded equities to be sports-related and based their conclusion, that fans are better off watching and playing sports than investing in them, on the performance of 2 exchange traded funds; one of which (FANZ) has beat the S&P since its July ’17 inception, which would seem to counter to their argument. The article cites Matt Hougan, the CEO of Inside ETFs, and his belief that most of the economic value within sports (ownership and player contracts) “comes in private transactions”, to support the author’s thesis; but fails to pay consideration to the revenue streams that support those contracts (and generate ownership profits). It’s worth noting that JohnWallStreet follows over 100 sports-related equities.

Howie Long-Short: Sports teams generate revenue from 4 sources; broadcast rights, ticket sales, sponsorships and merchandising. Several publicly traded equities use a similar business model; Churchill Downs (CHDN), International Speedway (ISCA), Dover Motorsports (DVD) and Speedway Motorsports (TRK), and thus should also be included on the list. Others, like Acushnet Holdings Corp. (GOLF) and Callaway Golf Company (ELY), are undeniably directly tied to sports; and no one would claim your basket was unfocused if companies like Nike (NKE), Lululemon (LULU) and Fitbit (FIT) were to be included. Oh, and don’t forget Activision Blizzard’s (ATVI) new esports league (Overwatch); their inaugural season starts today.

Fan Marino: The story names the New York Knicks, New York Rangers (MSG), Atlanta Braves (BATRK), Manchester United (MANU) and Borussia Dortmund (BORUF) as the teams you can purchase equity in. The Toronto Blue Jays, Toronto Maple Leafs (RCI), Juventus F.C. (JVTSF), A.S. Roma (ASRAF) and SS Lazio (BIT: SSL) are also all publicly traded.

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Adidas Invests in Facebook for Soccer

Onefootball, a German mobile application with 25 million users across 200 countries, announced it has closed on Series B and Series C funding rounds; the company previously acknowledged raising $20 million in investment capital. Described as “Facebook for football without the social element”, the app offers news, live scores and stats for over 140 leagues in 16 languages. Focused on building a premier user experience that results in higher conversions for advertisers, founder Lucas von Cranach said that despite the captive audience (90% opt-in to receive push notifications), the company “won’t build a betting business, won’t build a merchandise business, and we won’t build a ticketing business”.

Howie Long-Short: Onefootball remains privately held, but Adidas (ADDYY) participated in the most recent round; finding value in the captive mobile fan base mentioned. Information pertaining to the amount of capital invested and valuation were not disclosed. There are several publicly-traded soccer teams. Manchester United is traded on the NYSE under the symbol MANU. You can buy A.S. Roma (OTC: ASRAF), Juventus (OTCJVTSF) and Borussia Dortmund (OTCBORUF) over-the- counter. Lazio is traded on the Borsa Italiana under the symbol BIT: SSL.

Fan Marino: As recently noted, more teams at the 2018 World Cup will wear uniforms made by Adidas (11) than Nike (10); but that won’t be the case when it comes to cleats. It’s expected that for the 2nd World Cup in a row, more than half of all players will be wearing NKE footwear; 52% wore the brand at the ’14 WC. For comparison purposes, just 36% of players wore Adidas footwear in 2014.

Onefootball has quietly raised a Series C round and added Adidas as an investor

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