Softbank Group Corp. (SFBTY) recently made a $1 billion investment in Fanatics and the apparel manufacturing giant plans on using the capital to pursue global expansion. Fanatics, which currently generates just $200 million (of the $2 billion it will generate in 2017) in international sales, is looking to grow global revenue to $10 billion within 5 years; with half of the business originating outside of the U.S. The company will start by opening manufacturing facilities in Germany and China in 2018, before establishing residence in Japan and Australia in 2019. Concerns do exist, pertaining to varying cultural norms and the company’s ability to penetrate a complex Chinese market, but a global sports merchandise market worth an estimated $25.3 billion is worth pursuing.
Howie Long-Short: CEO Michael Rubin believes he’s built a moat around the business, saying competitors “can’t be a significant player without the rights (NFL, NBA, MLB, 500 Colleges/Universities etc.) that we possess.” NPD Analyst Matt Powell disagrees, arguing “what they’re doing is replicable.” Fanatics has exclusivity agreements with the leagues that span 13-17 years. That’s too far down the road for me to be concerned about competition. Look at the 1995 Fortune 500 list and compare it with the 2016 edition. A lot can and will change in 10 years. Just 3 of 2006’s Top 10 companies (by market cap) remained on the list in 2016.
Fan Marino: Fanatics announced earlier this week that it has extended its NHL deal through the 2034 season. The new deal gives the company rights to produce the league’s premier “Center Ice” collection, replica jerseys (on-ice jersey rights are held by Adidas) and championship apparel. Fanatics also picked up exclusive rights to sell NHL headwear within sporting goods retail channels.
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