We have obtained some additional information since the announcement by Nike Inc. on May 31 that it intends to divest two of its brands – Umbro and Cole Haan – to concentrate on the Nike, Jordan, Converse and Hurley brands. The process, which is expected to be completed by the end of the new fiscal year, in May 2013, coincides with a major reorganization of the Nike and Converse businesses in Western Europe.
For one thing, we have learnt that John Schweitzer, a veteran of the Nike group, is moving to the Netherlands to act as the new general manager of Converse for the Europe, Middle East and Africa (EMEA) region. He has been acting most recently as chief financial officer of Converse, based in the U.S.
Schweitzer will be replacing Bry Roskoz, who has moved to the U.S. for a position at Umbro. One of his tasks will be to the oversee a major reorganization of the distribution of Converse in two key European markets as this successful brand is gradually abandoning its licensing mode in Europe.
As it already did in the U.K. and Ireland at the beginning of 2011, Converse will be taking Spain and Portugal under its direct control as of Jan. 1, 2013, after a rather successful history of distribution by Proged in the Iberian Peninsula over the past ten years.
Converse is setting up its own Iberian subsidiary this month to take orders for spring/summer 2013 and to ensure a smooth transition. The operation will be led by Oriol Martinez, who has been responsible for Nike's sportswear division in the region.
In exchange for the loss of the juicy Converse license, Proged will take on board the distribution of Umbro in Spain, Portugal and Andorra from Umbro International, which had previously taken it over from a local licensee (more on this and the future of Umbro in today's issue of SGI Europe).
At the same time, the long-statnding licensing contract that Converse has maintained for the French market with Groupe Royer will be transformed into a distributorship. Converse will invest in product development, merchandising and marketing in France, expanding services to retailers and consumers. Converse has already appointed a former manager of Royer, Bertrand Gachon, as its general manager for France, Royer will continue to drive sales and the distribution until the end of 2015, by which time the business will transition to a full-fledged Converse subsidiary.
Converse would not comment on a report that it plans to take over the distribution of its products also in Germany and Italy from its licensees in both countries at some future stage. Like in France, the brand has achieved through them an annual turnover of about €100 million at wholesale in each of them. Anyhow, the licensing contract with Graziella Caberlotto in Italy is set to run for another couple of years.
Meanwhile, observers reacted positively to Nike's decision to shed its ownership of Umbro, which has not been profitable recently. The brand has not made any huge progress since Nike took it over in early 2008 for the equivalent of $582 million.
The sale of Umbro and Cole Haan will not be a major loss for the Nike group, as they only represented 3.6 percent of its total revenues in the 2010/11 financial year. Divesting them “will allow us to focus our resources on the highest-potential opportunities for Nike Inc. to continue to drive sustainable, profitable growth,” said Mark Parker, president and chief executive of the group, in a prepared statement.
Nike has no official word as to whether any candidates have already lined up to bid for Umbro or for Cole Haan, the American brand of casual and dress leather shoes that Nike acquired in 1988.
As for Cole Haan, whose sales grew by 12 percent to $518 million in the financial year ended in May 2011, there has been hardly any fit between these brand and others in Nike's portfolio, aside from some collaboration in cushioning technology and sourcing.
Observers name Wolverine Worldwide among the possible investors in Cole Haan, although that company is already going to be highly leveraged with its planned acquisition of Saucony and other properties of Collective Brands. Aside from the usual group of equity investment firms, other potential strategic investors are possibly VF Corporation and PPR.