Fanatics will absorb Nike’s college fan apparel manufacturing under an exclusive deal, the company told Yahoo Finance on Wednesday.
According to some Wall Street analysts, the move could potentially create additional profits for the sports retail giant.
“Generally, when companies change suppliers, it is because they can obtain: either a more innovative and better product, greater efficiency, or the same product at a lower price,” said Cristina Fernandez, CEO of Telsey at Yahoo Finance. “With this deal, it appears Nike is benefiting from an expanded assortment and faster time-to-market, while allowing the company to focus on marketing.”
The college football outsourcing follows the path of existing partnerships between Nike and Fanatics for NFL and MLB fan apparel. For Nike, which sold $3.3 billion in activewear last quarter, the move helps the company dive deeper into college athletic gear. Once the manufacturing change takes effect in the summer of 2024, Nike plans to roll out more offerings with Fanatics, including a focus on women’s sports.
“We are proud to extend our longstanding partnership with Nike and implement our innovative vertical commerce model across their preeminent list of universities,” said Doug Mack, CEO of Fanatics Commerce and Vice President of Fanatics Holdings. , in a statement to Yahoo Finance. “Our team is excited to maximize the value of Nike’s college partnerships by accelerating the time-to-market of fan gear through our agile supply chain, resulting in an expanded assortment of timeless and on-trend products from the Nike brand for college fans and retailers everywhere.
Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC, pointed to college athletics as an attractive space for Nike given the wide fan base. But more than the expanded customer base, Feinseth argued that this partnership bolsters Nike’s efforts to diversify its supply chain sourcing.
“They will outsource manufacturing when it makes sense,” he told Yahoo Finance. “And they also want to have a global supply chain because if anything the pandemic has taught us, having a supply chain dependent on China is just not good on many levels because of the issues of ongoing COVID, increased volatility in the country relationship and people’s perception of the country relationship, especially when buying an American brand, an American brand team.
Fanatics, an online sports retailer among other practices, owns and operates its own manufacturer. This, combined with Nike’s rolodex of successful college partners — 51% of this year’s NCAA March Madness 2022 men’s and women’s teams were sponsored by Nike — could push the Oregon-based sports superpower further into apparel dominance. university sports.
With the partnerships already in place for MLB and NFL products, Fanatics is now more entrenched in Nike’s sportswear business. Fernandez pointed out that this would likely be positive for Nike from a cost-benefit perspective while deepening a larger narrative within the company to streamline merchandising.
“Nike has also been on track to work with fewer, but better partners, which can translate to consolidation in other parts of the business,” he said. “For Nike’s retail partners, the agreement benefits them because they will be able to purchase both professional and college Nike apparel and accessories from the same supplier, simplifying the purchasing process.
Josh is a producer for Yahoo Finance.
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