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Nike, the US sportswear group, said on Thursday that it would divest its Umbro and Cole Haan brands in an effort to focus on its core brand and other faster-growing business lines.
“Divesting of Umbro and Cole Haan will allow us to focus our resources on the highest-potential opportunities for Nike Inc to continue to drive sustainable, profitable growth for our shareholders,” said Mark Parker, Nike chief executive.
Umbro, the UK-based football brand, sponsors the England team kit and its diamond logo appears on sportswear around the world. Nike took Umbro private in 2008 for £285m, as the Oregon-based company sought to increase its football revenues, which it said at the time had reached $1.5bn annually.
However, Umbro failed to perform under Nike. Revenues of $276m in 2006 fell to $224m last year. Nike did not indicate if it would seek to relist Umbro or sell it.
In 2009, Nike wrote down $400m based on Umbro’s declining goodwill, a move that helped the company achieve a lower effective tax rate for the year.
“Although Umbro’s financial performance for fiscal 2009 was slightly better than we had originally expected, projected future cash flows had fallen below the levels we expected at the time of acquisition,” the company said in last year’s annual report.
“This erosion was a result of both the unprecedented decline in global consumer markets, particularly in the United Kingdom, and our decision to adjust the level of investment in the business.”
Cole Haan had revenues of $518m last fiscal year, a 12 per cent rise from the previous year. It operates 190 stores worldwide, with a majority of them in the US, including a flagship location in New York City’s Rockefeller Center.
The sale or spin-off of Cole Haan and Umbro will mark the second recent bout of deal activity in the footwear business. In May Collective Brands, the group behind Payless ShoeSource and Sperry Top-Sider split itself up.
Nike said the divestitures would allow it to focus on its core brands.
“We see tremendous opportunity to accelerate profitable growth around the world by continuing to deliver innovation and inspire consumers through the Nike brand,” said Mr Parker. “We also see significant potential in Jordan, Converse and Hurley, which have unique consumer relationships that complement the Nike Brand.”
Nike revenues were $20.8bn last year, up from $16.3bn in 2007.