Nike Sale Of Cole Haan Looks Like A Plus

Written by: on 18th December 2012
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Nike Sale Of Cole Haan Looks Like A Plus  |

Most analysts are saying that Nike’s late November sale of its Cole Haan fashion brand to the private-equity firm Apax Partners for $570 million was a good move overall.

 

About a month before that, Nike sold the soccer apparel maker Umbro for $225 million in cash to the Iconix Brand Group Inc.

 

Nike Chief Executive Officer Mark Parker has said that the company is focusing on the business units with the most growth potential and profitability, which is primarily its athletic footwear.

 

Nike wants to drive growth in the Nike, Jordan , Converse and Hurley Brands.

 

Cole Haan was different than Nike’s usual offerings, as its best known for its handbags and leather dress shoes. Tennis player Maria Sharapova spent a lot of time promoting its line.

 

Nike bought Cole Haan in 1988 for $95 million. In 1989, the division had sales of $87 million.

 

In the fiscal year ended May 31, Cole Haan increased its revenue 2.7 percent to $535 million. They have 109 stores in the U.S. and another 69 abroad.

 

Cole Hahn sales made up 2.2 percent of Nike’s $24.1 billion sales overall.

 

The sale price was more than five times what it paid for the company and it’s around one times of Cole Haan’s annual revenue, which is far better than it did with Umbro as it sold it for less than what it paid in 2008.

 

Even though Cole Haan’s revenue has increased dramatically, it and Umbro had a combined loss of $43 million before interest and taxes in fiscal 2012. Nike has said they were projected to lose as much as $75 million if owned for all of fiscal 2013.

 

Apax is based in London and has experience in retail and fashion, buying the Tommy Hilfiger brand in 2006 for about $1.6 billion and then later selling it to Phillips-Van Heusen for about $3 billion four year later. Apax also has invested in Calvin Klein and rue21 Inc. Jack Boys, who served as CEO of athletic shoe brand Converse from 2001 to 2009, will lead the Cole Haan brand.

 

Nike ended its first quarter of its fiscal 2013 with $3.3 billion in cash, equivalents and short-term investments.

 

Over the past decade, shares of Nike have quadrupled. During the recession it dropped to the low $40s (in 2009) , but shares have more than doubled since then.

 

Year to date, shares of Nike have fallen about 4%. Shares rose from $95 in January to a peak at $115 in May. It is currently trading for around $97.

 

The interments advisors Sterne, Agee & Leach rate Nike’s stock as Neutral as they are concerned about uncertainties in the Chinese and Western European markets.

 

However, they are raising their fiscal 2013/2014 earnings-per-share estimates on Nike, to $5.25 to $5.94.

 

The investment advisor Trefis’ stock price estimate for Nike is $109.

 

Nike expects to complete the Cole Haan sale early in 2013.





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