On Wednesday, NIKE, Inc. (NYSE:NKE) announced it will sell its Umbro soccer brand to Iconix Brand Group, Inc. (NASDAQ:ICON) in a $225 million cash deal.
The news comes after NIKE, Inc. (NYSE:NKE) said in May that it planned to sell its Umbro and the Cole Haan lifestyle brands, as a means to streamline its product offerings.
According to Bloomberg, Umbro’s sales in the fiscal year ending May 31 increased 17 percent to $262 million, after going virtually unchanged in the prior year. When Nike announced its sale, analyst Chris Svezia of Susquehanna Financial Group noted the company was unprofitable.
NIKE, Inc. (NYSE:NKE) had previously said the Umbro and Cole Haan units had a combined loss of $43 million before interest and taxes in fiscal 2012, and would lose as much as $75 million if owned for all of fiscal 2013.
The deal, which is expected to close by the year’s end, also represents an end to just one of the numerous acquisitions that hasn’t turned out well for Nike, reported Bloomberg. The company has purchased, and subsequently sold, the apparel company Starter (to Iconix Brands in 2007) and Canstar Sports Inc., a hockey gear maker.
The sporting goods company has found success with the Converse brand, which has grown under Nike.
Nike purchased Umbro back in 2008 for about 302 million pounds ($483.7 million), reported Bloomberg. At the time, Umbro looked like a good match, enabling Nike to expand its European customer base and potentially overtake Adidas AG (ETR:ADS), which was the world’s biggest soccer company at the time.
In the acquistion, Umbro also brought along its deal with the England national soccer team to provide uniforms to them. The new relationship between Nike and Umbro had been seen as “dynamic alignment” that would push Nike into the world’s lead in soccer.
By selling Umbro, it will not leave Nike without its hand in the worldwide soccer market, as it sells gear through its Nike Football line.
Mark Parker, Nike’s chief executive, said in a statement on Wednesday, “It is a difficult decision to divest any business, but this action will enable us to focus on our highest-potential growth opportunities. Umbro has a great heritage, but ultimately, as our category strategy has evolved, we believe Nike Football can serve the needs of footballers both on and off the pitch.”
NIKE, Inc. (NYSE:NKE) is still looking for a buyer for the Cole Haan unit, and back in August, Reuters reported some private equity firms may be interested.
Earlier this year, questions had also been raised on Nike’s valuation.
On Wednesday, the stock is up 0.08%, trading at $92.90. Year-to-date, the stock is down 3.61 percent.
