Mo Bamba Talks Shoe Deals, Marketing Strategy and the Harlem to Harvard Narrative

NCAA Basketball Tournament - First Round - Nashville
NASHVILLE, TN – MARCH 16: Mohamed Bamba #4 of the Texas Longhorns looks on against the Nevada Wolf Pack during the game in the first round of the 2018 NCAA Men’s Basketball Tournament at Bridgestone Arena on March 16, 2018 in Nashville, Tennessee. (Photo by Andy Lyons/Getty Images)

On Tuesday evening, sports collectibles leader and exclusive trading partner of the NBA/NBPA, Panini America (@PaniniAmerica) held a pre-draft event at the NBA Players Association offices for VIP collectors and hobby stores. Donte DiVincenzo (Villanova), Chandler Hutchinson (Boise State), Michael Porter Jr. (Missouri), Trae Young (Oklahoma) and Mo Bamba (Texas) were in attendance to take pictures, sign autographs, participate in a basketball clinic, and talk about the excitement of seeing their first Panini trading cards. JohnWallStreet had a chance to talk with Mo Bamba about his official visit to Harvard, attending the Darrel Morrey Sloan sports analytics conference (2x) and the impact playing for a Nike school (Texas) will have on who he decides to sign a shoe deal with.    

JWS: You took official visits to Texas, Duke, Kentucky, Michigan and Harvard. How serious was your interest in attending the Ivy League school?

Mo: Harvard was very much a real thing for me simply because it’s one of the best schools in the world. If I could use basketball as a platform to get in there, it would turn some heads and maybe someday I could be (looked at as) one of the top influencers in the world. As the recruiting process went along, eventually I realized that it wasn’t a viable landing spot for me, but someday there will be a 5-star prospect who will be the first to go to Harvard and do things the right way as far as being an academic all-star. I wanted to be that guy. I fell in love with the Harlem to Harvard narrative.

JWS: You’ve attended the Darrel Morrey Sloan sports analytics conference twice. Was there a single message that’s resonated with you?

Mo: There was one panel with David Falk (agent) on it and he was talking about how there was this tennis player whose parents were asking him to market their son, to maximize his earning potential. He told them that there wasn’t much he could do for them, that winning was the best thing an athlete could do to market themselves.    

JWS: That’s interesting because one would assume you would have had a better chance to win a college basketball championship had you gone to Duke or Kentucky. Do you have any regrets about going to Texas?

Mo: The only thing I regret about the recruiting process is not committing earlier. I bet on myself. I didn’t need an institution to back me up.

JWS: You have yet to sign a sneaker/apparel deal. Does the fact you played for a Nike school have any impact on who you will end up with?

Mo: No, not necessarily. I went to Under Armour camps, I went to Adidas camps and I got the feel for different shoes. I’ve also considered Puma. Ultimately it just comes down to who I feel closest to and who will put the best plan in motion for me as a professional basketball player.

Howie Long-Short: Earlier this week, we wrote that Puma (PMMAF) had announced its re-entry into the $1.131 billion U.S. basketball market with the signing of Marvin Bagley III (5 years). That was just the start of things — the company has since announced the hiring of Jay-Z as Creative Director, locked up DeAndre Ayton (plus Michael Porter Jr. & Zhaire Smith) and signed Walt Frazier (1st basketball player to endorse brand) to a life-time deal. While the company made has made headlines bringing in 2 top rookies and the rap icon, their choices are puzzling. Big men traditionally do not move shoes and celebrity ambassadorships rarely result in increased sales (save Rihanna/Puma). Jay-Z may not help the company sell any sneakers, but he should be able to help them land stars that are signed to his Roc Nation Sports agency.

Trae Young is another guy who Puma had been targeting. Young ultimately selected Adidas over Puma and Nike. It’s worth pointing out that neither Bagley, Ayton, Porter Jr., Smith nor Young signed with the company that outfitted their collegiate team.

Fan Marino: With a 7 foot 10 inch wingspan, Mo Bamba is set to become the “longest” player in NBA history (or at least the 19 year history of the NBA draft combine – Manute Bol reportedly had a 8 foot 6 inch wingspan); for comparison purposes, that .5 inch wider than Rudy Gobert’s and 2 inches wider than Shaq’s.

However, unlike those traditional bigs, Bamba can run. At May’s combine, the time he posted sprinting ¾ of the length of the court beat the times put up by Russell Westbook and John Wall at their respective combines. With a skill-set like that, it’s no surprise experts have Bamba projected to go as high as 3rd in this evening’s draft. DeAndre Ayton is expected to go first to Phoenix. The Sacramento Kings are expected to pick between Marvin Bagley and Luka Doncic at #2.

Moments after being drafted tonight, Mo Bamba’s first Panini NBA trading card will be made available on the Panini Instant (#PaniniInstant) online platform (https://qr.paniniamerica.net/2myjt) along with other NBA Draft Picks.

Speaking of DeAndre Ayton, he signed an exclusive autograph/collectibles deal with Panini America on Wednesday afternoon. Panini plans to feature the Arizona center on packaging for 2018-2019 products and his autograph can be found in packs of NBA and collegiate licensed packs. Suns fans will have the chance to buy his first card shortly after he shakes the commissioners hand.

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Puma Steals Bagley III from Nike, Announces Entry into U.S. Basketball Market

Puma

Marvin Bagley III has signed a 5-year footwear and apparel deal with Puma, rumored to be worth up to $9 million annually, the largest rookie shoe deal since Kevin Durant signed a 7-year $60 million deal with Nike in 2007. Bagley, projected to be a Top 5 selection in Thursday evening’s NBA draft, will become the first NBA player to be sponsored by Puma since Vince Carter signed a 10-year $50 million deal with the company back in 1998; Carter terminated the deal in his Sophomore season to sign with Nike. Puma is negotiating with several other rookies (Trae Young has been mentioned) in the 2018 draft class and will reportedly target veterans with expiring shoe contracts later this fall, as the company looks to re-enter the lucrative U.S. performance basketball shoe market (down 13% from $1.3 billion peak in ’15).

Howie Long-Short: Puma is coming on strong and now taking aim at the U.S. market; in addition to their aggressive basketball ambitions (Nike controls 81.3% of the market including Jordan brand), the company announced it has signed a lease for 24,000 SF on 5th avenue for a North American flagship store. Puma has surpassed Under Armour and is now third in sales among athletic apparel brands, behind just Nike and Adidas.

Puma SE, a subsidiary of Kering, trades 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. PMMAF also increased FY18 sales (from +10% to +10%-12%) and EBIT (from $354-$377 million to $360-$383 million) guidance during the April earnings call.

Fan Marino: Nike won’t be pleased with this decision, considering they’ve been paying for Bagley’s allegiance since 2012. In 2008, the Bagleys filed for Chapter 7 bankruptcy, claiming 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 family moved into a California home estimated to be worth between $750,000-$1.5 million; rent in the area ranges from $2,500-$7,500/mo. The elder Bagley has acknowledged the family used Nike money to “make ends meet.”

That kind of arrangement isn’t atypical, The Oregonian released a piece back in March detailing how sneaker companies skirt NCAA regulations by targeting the family members of star prospects who control their own AAU programs; offering a “blank check” for their allegiance. What is unusual, is Bagley took Nike money and then signed with Puma; analysis of 2017 NBA first round picks indicates that most players signed professional shoe deals with the company that sponsored their grassroots team. It’s worth noting that Bagley’s deal with Puma includes a commitment from the brand to continue funding his father’s AAU program.

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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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Puma Re-Entering Basketball Business After 17-Year Hiatus

Puma

Puma (PMMAF) has announced that after a 17-year hiatus, it will be re-entering the basketball business. The brand, which generates the bulk of its sales from soccer and running related products in Europe, sees “substantial upside” to building a basketball vertical within the U.S. PMMAF will also aggressively target Greater China (known for its appreciation of the sport), expecting the region to become its most lucrative market by ’22. The marketing strategy will focus on the “culture around the game”, using “culturally relevant” athletes and entertainers (as they’ve done successfully with Rihanna) to market the new product line. It must be noted that despite Puma and ADDYY’s optimism, the U.S. basketball sneaker business remains “challenged”; Foot Locker (FL) reported Q4 ‘17 comparable store sales down “high single digits” YOY for the category.

Howie Long-Short: Puma (PMMAF) wants to increase profitability, so entering a Chinese market that generates the highest profit margins in the world on sporting goods is logical. The stated goal is to lift operating profit from 5.6% in ’17 to 10% by ’22, reasonable when you consider Adidas (ADDYY) and Nike (NKE) reported profit margins of 9.8% and 13.8% respectively in 2017 (ADDYY also just raised its target to 11.5% by ’20). The announcement was made at a capital markets day where the company also announced it expects currency-adjusted consolidated net sales to grow 10% annually until 2022, plans to increase DTC sales from 23% of sales to 30% of sales (over the medium term) and a proposed dividend of 25%-35% of consolidated net earnings to begin in ’19; resulting in share prices closing +5.73% (to $504.87) on Wednesday. It should be noted that back in January, Puma’s parent company Kering S.A. (PPRUY) announced it would be spinning off the brand to focus on its high-margin luxury businesses; shares are up 32% since.

Fan Marino: The game of basketball has changed since Puma last occupied the space, most dramatically as it relates to volume 3-point shooting (see: Steph Curry, Trey Young). USA Basketball is doing what it can to prevent the next generation of basketball stars from standing on (or 5 feet behind) the 3-point line. New rules eliminate 3-point FGs for players under the age of 11, to promote shooting from a “developmentally appropriate distance”; and provide for smaller basketballs and lower baskets for younger kids. The implementation of a shot clock for grades 9-12, was the most controversial rule change enacted.

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Kering to Spin Off Puma SE, Focus on High-Margin Luxury Brands

Puma

Kering (OTC: PPRUY) has announced plans to spin off a majority stake in Puma SE (PMMAF), enabling the company to focus on its high-margin luxury brands Gucci, Yves Saint Laurent and Balenciaga. CFO Jean-Marc Duplaix indicated the group would also look to rid itself of the boardsports label Volcom. The company will distribute 70% of Puma shares to its investors, reducing its own stake to 16%. The transaction price will be determined at April’s shareholder meeting. PPRUY shareholder Groupe Artemis (see: Francois Pinault), will become PMMAF’s largest shareholder; controlling 29% of the company.

Howie Long-Short: Kering paid $6.4 billion for Puma in 2007, slightly above the current market cap ($6.1 billion); despite the stock price climbing 45% over the last 12 months. Despite not yet having capitalized on the turnaround (profits fell from $324 million in ’07 to $6.3 million in ’13, before rising to $161.5 million over the first 9 months of ‘17), it makes sense for Kering to sell their sportswear (and lifestyle) brands; as Duplaix explained, the company has found itself in “a sort of imbalance, linked to the outperformance of the luxury sector.” In other words, their sportswear businesses were dragging down the overall performance of the company; particularly Gucci, among the hottest names in fashion.

Fan Marino: PMMAF, the German footwear and sports apparel manufacturer, will report full year earnings on February 12th; after having increasing profit guidance 3x in 2017. The company turnaround can be attributed to a refocusing on the world’s most popular sports (soccer, running, motorsports) and a boost in women’s sportswear sales. Puma publicly stated it welcomes the transaction, but shares closed -4.4% on Thursday amid concerns the company lost a powerful backer.

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PIPER JAFFRAY REPORT INDICATES TEENS WILL NO LONGER WEAR UNDER ARMOUR

Piper Jaffray Companies (PJC) 34th biannual “Taking Stock with Teens” report has been released and Under Armour (UAA) has once again been named the No. 1 company teenage males perceive as an “old brand”, one they will no longer wear; while Nike (NKE) and Adidas AG (ADDYY) placed 1st and 3rd respectively, as the most preferred brands. As for footwear preferences, Nike remains #1, but lost 5% of teens (down to 46%) to Adidas over the last 12 months. The report indicates that athleisure remains popular, but trends are shifting towards “street, denim and festival wear”.

Howie Long-Short: For the first time in a generation, the majority of teens didn’t list Nike as their favorite footwear brand. Adidas has been getting a lot of the attention, but Puma (OTC: PMMAF) and New Balance are quietly picking up market share as well. Teenagers contribute $830 billion (7%) to retail’s bottom line, so their opinions (and purchases) aren’t insignificant.

Fan Marino: Nike is offering an unprecedented 40% off through 10/13. The sale includes 200+ items, including product from its premium Jordan Brand. Up until 18 months ago, Nike rarely ran sales. Now, I don’t buy Nike unless it is on sale (25% is offered frequently).

Teens say Under Armour is an ‘old brand,’ as Adidas and Vans grow more popular