Reebok's loss of NFL contract could hurt local plant

October 12, 2010

The National Football League's decision to replace Reebok with Nike Inc. in a new apparel licensing deal could be bad news for a local plant that employs about 1,000 people.

Nike Inc., the world’s largest sporting-goods maker, won the license to make NFL-branded apparel and uniforms, replacing Reebok, the league announced Tuesday.

NFL owners approved a licensing deal with Nike that will begin in 2012, the league said in an e-mailed statement. Reebok, which was acquired by Adidas AG in 2006, has held the license since 2001.

Adidas AG’s Reebok U.S. sports licensing division is headquartered on the east side of Indianapolis just west of the intersection of 25th Street and Post Road. The facility manufactures, designs and distributes apparel for the NFL, National Basketball Association, National Hockey League, Major League Baseball and the NCAA.

A plant manager could not be reached for comment late Tuesday morning.

John Horan, publisher of trade publication Sporting Goods Intelligence, said layoffs are a strong possibility.

“The NFL business, I’m sure, is a huge percentage of what the [plant does], so it’s a big deal,” he said. “I assume they’re going to have to make some adjustments. Nike certainly isn’t going to use the facility.”

Reebok’s NFL license represents $350 million of its $565 million in U.S. apparel revenue, Kate McShane, an analyst at Citigroup Inc. in New York, wrote in a report to investors Monday. The license may boost Nike’s earnings per share as much as 3 percent in 2012, said McShane, who is based in New York and has a “buy” rating on the shares.

Nike had the resources and is willing to pay for it, Chris Svezia, an analyst for Susquehanna Financial Group in New York, said in an interview. “Is it game-changing for them? No. $300 million to $500 million is 2 percent to 3 percent of global revenue. That’s small.” Svezia has a “neutral” rating on the shares.

Adidas spokeswoman Katja Schreiber declined to comment to Bloomberg on the report and wouldn’t give an estimate of NFL-related sales.

Adidas, which bought Reebok in 2006, wants to make the unit more profitable by repositioning it as a fitness-apparel and shoe specialist.

“If we lose the NFL, it won’t make or break our company,” Adidas CEO Herbert Hainer told CNBC on Sept. 29.


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