For the 2nd time this month, Nike (NKE) has acquired a company capable of “advancing (its) capabilities in computer vision and artificial intelligence”. The technology developed by NKE’s latest purchase, Invertex, will power the company’s “consumer direct offense.” Invertex specializes in mass customization, developing 3D body scanning software that will “create the most compelling Nike consumer experience”; both in store and online. News of the purchase comes just 3 weeks after the company announced it had acquired Zodiac; a consumer data analytics firm capable of improving customer acquisition, reducing churn and enhancing the accuracy of sales forecasts. Financial terms were not disclosed on either deal.
Howie Long-Short: NKE’s desire for a “consumer direct offense” led to the formation of Nike Direct, a corporate restructuring focused on the 12 markets expected to generate 80% of corporate growth through 2020 (when it hopes to do $50 billion in sales); New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan. While $50 billion remains a pie in the sky figure, the company did report a “significant reversal of trend in North America”, growth in DTC sales and improved international sales (+24% YOY in China, +19% in Middle East and Africa) as it beat analyst expectations (revenue + 7% to $8.98 billion) in fiscal Q3 ‘18.
Fan Marino: In a surprising development, the University of Washington spurned Nike following expiration of a 20-year pact, signing a 10-year, $118 million deal with Adidas; one of the 10 most lucrative apparel contracts in college athletics. The timing of the Zodiac and Invertex acquisitions give off the appearance that NKE is choosing R&D over marketing, but NKE likely made a conscious decision to pass on Washington once the deal’s total value passed $88 million; the amount they’ll pay rival (and Nike founder Phil Knight’s alma mater) Oregon, over the next 11 years.
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