Houston Billionaire, Tilman Fertitta is the new owner of the Houston Rockets. Les Alexander agreed to sell the franchise for $2.2 billion, the most ever paid for an NBA team. Alexander decided to sell the Houston basketball team to focus on his philanthropic efforts. He recently donated $10 billion to Hurricane Harvey relief. Ferttita, the Landry’s Inc. and Golden Nuggets Casinos owner, was an original investor in the Houston Texans franchise.
Howie Long-Short: Feritta attempted to buy the Rockets in 1993. He offered $81 million, Alexander submitted the winning bid of $85 million. It might be a day late for Fertitta, but it is certainly not a dollar short.
Fan Marino: Fertitta, an extremely wealthy man, spent 71% of his net worth on the franchise. When Steve Ballmer bought the Clippers for $2 billion, he spent just 6% of his. Ballmer was the 30th employee at Microsoft (MSFT) and owned 8% of the company when incorporated in 1981. It’s good to have Microsoft money!
Tilman Fertitta to buy Rockets for record $2.2 billion
Adidas (ADDYY) has signed a 10-year extension to remain the official footwear & apparel provider of University of Louisville athletics. The deal, worth $160 million, gives Louisville the 4th richest apparel agreement in college sports. The University will receive $10 million/year in base compensation between 2018-2021 and then $7 million/year through 2028, a significant increase from $1.575 million they will receive for the 2017-2018 academic year.
Louisville, adidas Strike Landmark 10-Year Partnership Through 2027-28
Howie Long-Short: Considering UCLA got $280 million over 15 years from Under Armour (UAA), ADDYY got good value on the deal. But, in 2013-2014, Louisville finished 24th in merchandise sales. That doesn’t seem to warrant the 4th largest deal in college athletics. Sounds like both sides got a good deal.
Fan Marino: The next school to get a massive payout? The University of Washington. Their contract with Nike (NKE) expires in 2019. Oregon, Oregon State and Washington State are all under NKE contracts through at least 2025. Under Armour and Adidas want to expand their footprint to the Pacific NW. A bidding war is coming.
Barcelona star Luis Suarez announced on behalf of Stox, that the prediction marketplace is headed for Alpha testing. The news comes less than 30 days after the company’s $33 million (current market cap is $47 million) ICO and just 2 weeks after the announcement that they had submitted an LOI to purchase a company that holds 2 U.K. gambling licenses. The Stox platform is used for investors to place digital currency tokens on event-based outcomes (i.e. sporting events).
Less Than Month After ICO, Stox Kicks Off Alpha with Luis Suarez
Howie Long-Short: Stox is well positioned in its competition with Augur and Gnosis. Invest.com Group, which is behind Stox, has a large existing client base and has proven successful at driving traffic to similar projects.
Fan Marino: Suarez announced he put his STX tokens on Federer to win the U.S. Open. Not exactly picking the underdog. Roger was the favorite coming in at +175 (OddsShark). He won last night to advance to the quarterfinals.
Lululemon (LULU) reported Q2 profits ($.39 compared with $.35) and sales (7% compared with 4%) that beat analysts’ estimates and updated full year forecasts ($2.35-$2.42/share) that topped projections. CEO Laurent Potdevin attributed the continued growth to improved marketing, an effort to drive international sales and an increased focus on their e-commerce business. The company has also been working to increase its appeal to men and add technical innovations to their clothing that set them apart in a crowded athletic-apparel marketplace. Potdevin reiterated that the yogawear brand remains on a trajectory to hit $4 billion in revenue by 2020.
Lululemon Posts Surprise Profit Growth In Q2, Raises Guidance
Howie Long-Short: You keep reading about the warning signs of the athleisure trend coming to an end, but I don’t believe that to be the case. FINL and FL are struggling because brands are going DTC, not because the consumer no longer wants to be comfortable outside the gym.
Fan Marino: Part of the reason analysts projected lower Q2 profits/earnings numbers was because of an uptick in online markdowns. That’s great news for fans of the brands! I checked out their “we made too much” section and it has a TON of stuff with at least a 25% discount.
CFB season is underway and with that, the opportunity to BBQ in parking lots across America. Corporate sponsors are once again eager to participate in the tailgate fun, and we here at JWS wanted to bring your attention to some of those campaigns, as they make their way to a city near you.
Dr. Pepper (DPS) vendor Larry Culpepper and his new vendor dream-team, which will be unveiled throughout the new brand campaign, will host tailgates at the following games:
- Atlanta, Georgia on December 1st and 2nd, 2017 for the SEC Championship Game
- New Orleans, Louisiana on January 1st, 2018 for the Allstate Sugar Bowl
- Atlanta, Georgia on January 8th, 2018 for the National Championship Game
Hyundai (KRX: 005380) will be providing a fun place to hang-out prior to the kickoff of 11 highly anticipated games. The Hyundai Fan Base is going to offer interactive elements (i.e. football toss contests) and provide fans with the opportunity to meet legends from the host school for photos & autographs. The game schedule includes:
- 9/16 – Florida State vs. Miami
- 9/23 – Georgia vs. Mississippi State
- 9/30 – UCLA vs. Colorado
- 10/7 – Florida vs. LSU
- 10/14 – Tennessee vs. South Carolina
- 10/21 – Texas vs. Oklahoma State
- 10/28 – Arizona State vs. USC
- 11/4 – Alabama vs. LSU
- 11/11 – Ohio State vs. Michigan State
- 11/18 – Penn State vs. Nebraska
- 11/25 – Michigan vs. Ohio State
Wendy’s (WEN) will be hosting tailgates in 11 cities, with their food truck in tow. The home of the Official Hamburger of the NCAA will be serving cheeseburgers and offering fans a chance to compete in games of corn hole on the following college campuses:
- 9/9 – Ohio State vs. Oklahoma
- 9/22 – Arizona vs. Utah
- 9/30 – Virginia Tech vs. Clemson
- 10/7 – Syracuse vs. Pittsburgh
- 10/14 – Nebraska vs. Ohio State
- 10/21 – Ole Miss vs. LSU
- 10/28 – Baylor vs. Texas
- 11/4 – Air Force vs. Army
- 11/11 – South Carolina vs. Florida
- 11/18 – Arkansas vs. Mississippi State
- 11/25 – Michigan vs. Ohio State
Howie Long-Short: College football tailgates are an intriguing place for brands to advertise. The average tailgater is a 25-44 year-old college educated male, spending 3-4 hours pre-gaming. Plenty of time to get your message across.
Fan Marino: There is nothing I enjoy more than eating and drinking in a parking lot prior to the start of a college football game. If the food, beer and entertainment are free, it becomes that much more enjoyable. Big fan of these promotions.
Fox (FOXA) Networks Group has announced that it will be introducing 6 second ads to NFL game broadcasts this season, making it the first legacy TV network to introduce the shorter ad format. Ads will appear in a small box adjacent to players on the field during stoppages in play or just prior to kickoff, with the most premium slots going for upwards of $200,000/spot. While traditional TV ads run 15 or 30 seconds, with 15 second ads gaining popularity in recent years (36% of ads in 2017 vs. 29% in 2014), YouTube (GOOGL) has championed the 6 second format since last year.
Six-Second Commercials Are Coming to N.F.L. Games on Fox
Howie Long-Short: Fox is charging roughly the same amount for a 6 second spot as it does for a 15 second spot, with justification being that the ads’ placement gives it greater attention/value. Expect 6 second ads to become an industry standard. If you can increase revenues and appease the viewer, you are on to something.
Fan Marino: Makes sense to me. The average NFL game take +/- 3 hours to broadcast, but only contains 11 minutes of actual game action. Plenty of time for brands to engage the fan, while glued to the game (i.e. not halftime, commercial time-outs).
As discussed here on JWS, Finish Line (FINL) recently announced that it has signed platinum hip hop group Migos to roles as creative directors, tasked with picking product, styling it for shoots and directing the production set. Since that announcement, several other partnerships have been unveiled. Pharrell Williams teamed up with Adidas (ADDYY) Originals to create a super-cool, 70’s-inspired tennis themed clothing line for the 2017 U.S. Open. A$AP Ferg reunited with Adidas Skateboarding to release apparel and footwear that will bring hip hop and skate together, drawing inspiration from vintage ADDYY track suits and the gritty NYC skateboarding scene and Kendrick Lamar announced that he has made the decision to leave Reebok (ADDYY) for a creative role with Team Nike (NKE).
Howie Long-Short: Adidas called their partnership with Kanye West “the most significant ever created between an athletic brand and a nonathlete”, and it’s hard to argue against that. The Chicago rapper single-handedly changed the perception of the athletic retailer. Now the company plans on opening stores dedicated solely to the Yeezy line.
Fan Marino: BIG fan of the Pharrell/Adidas line. This vintage tennis bag is the best of the collection. Interested in the A$AP FERG/Adidas line? It debuts TODAY; Friday, September 1st. Kendrick Lamar’s Nike collaboration is likely to focus around the Nike Cortez, which first debuted in 1972 and was re-released earlier this year.
As NASCAR attendance declines, racetracks have been actively working to add non-traditional events to their calendar, to supplement admissions revenue losses. Tracks located in major markets are having the most success, with Las Vegas Motor Speedway (TRK) hosting more than 1,400/year. The concert industry has been drawn to the massive facilities as the vast parking lots, camping areas and other existing amenities suit the needs of a music festival, but smaller events from women’s professional bowling events to American Royal BBQ contests have also found success at the unorthodox location. It should be noted that while no specifics have been given, even with 1,400 non-traditional events/year at Las Vegas Motor Speedway, the revenue generated from those events makes up less than half of the track’s annual revenue.
Tracks get creative in drive for new revenue
Howie Long-Short: Annual speedway revenues peaked in 2007 at $814 million. Revenues dropped all the way down to $661 million in 2016. These massive facilities cost money to operate and generate nothing when not being used. Why not try to book as many dates as you can fill?
Fan Marino: I’ve never attended an event besides a race at a NASCAR facility, but after watching Tennessee/Virginia Tech play the ’16 Battle at Bristol (TRK) in front of 153,000 people, watching a football game at one has been added to the bucket list.
Finish Line (FINL) scaled back profits estimates after receiving disappointing preliminary sales figures (down 3.3% YOY for Q2), and the share price has since decreased by nearly 20%. Shareholders had anticipated low, single digit percentage gains, before expectations were reset. Same-store sales are now expected to fall 3-5% for the full year, with adjusted per-share profit estimates dropping to between $.50-$.60, from a forecast of $1.12-$1.23. CEO Sam Sato described the athletic footwear market to be “competitive and promotional”, confirming what DKS CEO Edward Stack said earlier in the month. The company also announced the adoption of a shareholder rights “poison pill” plan designed to prevent unwanted takeover advances, after U.K. based competitor Sports Direct International (LSE: SPD) raised its stake in the company from 9.2% to 19.9% in June.
Finish Line plunges 28% after trimming outlook as sporting goods stocks tumble
Howie Long-Short: Not familiar with Sports Direct International? The company owns 468 stores in the UK and another 289 Internationally. Its portfolio of brands also includes sporting equipment companies Dunlop (in most markets) and Everlast. SPD is working to expand into the U.S. market, having purchased 50 Bob’s Stores and Eastern Mountain Sports outdoor adventure schools in June.
Fan Marino: The Finish Line relies heavily on Nike, generating 70% of its sales on NKE products. I find that remarkable. Everything NKE produces eventually hits clearance. The company will run 25% off of clearance, several times/year. I find no benefit to shopping and paying retail on athletic shoes.
NBA star Kevin Durant stated on The Ringer’s “Bill Simmons Podcast” that “nobody wants to play in Under Armours”, and UAA shares have dipped 3% since. Durant was answering a question related to why Maryland, a one-time power, has been unable to recruit elite basketball players over the last 20 years. In 2014, UAA aggressively pursued Durant to sign an endorsement deal, but the Warrior’s star chose to resign with Nike (NKE) for an estimated $285 million over 10 years.
NBA star Kevin Durant slams Under Armour, and stock takes a dive
Howie Long-Short: Finish Line announced that it would be cutting its full year profits forecast amidst a highly promotional retail environment. The share price fell 18% thereafter. I’m attributing the 3% UAA drop to the statements released by FINL, not the off-hand comment from KD, who is from Maryland but chose to play at Texas.
Fan Marino: UCLA signed 4 5-star basketball recruits between 2016-2017; only Kentucky, Duke and Arizona had more. So perhaps it’s a Maryland issue, not an Under Armour issue.