Adidas’s Basketball Allegations Won’t Hurt Top Line, for Now

Updated on
  • Global revenue from basketball products just EU340 million
  • That’s <2% of total revenue, as other lines drive growth

FBI, NCAA and the Line Between Deals and Bribes

Adidas AG’s mission to expand its basketball footprint in North America hasn’t made a major difference so far. That may now be a comfort to the German athletic-goods company as one of its executives is embroiled in a U.S. college-basketball bribery investigation.

Adidas expects to generate just 340 million euros ($401 million) from basketball products worldwide this year, the company said in response to questions from Bloomberg, providing details not previously disclosed in its financial reports. That’s less than 2 percent of its global sales, and the scandal is unlikely to wipe out that revenue entirely. Adidas generated 19.3 billion euros in revenue last year and aims to lift the measure to about 26 billion euros by 2020.

Shares of Adidas have been little affected by the investigations, down less than 1 percent since Monday’s close. Top-tier college basketball programs were thrown into turmoil Tuesday as federal prosecutors unveiled criminal charges against 10 people, including coaches, managers, financial advisers and two representatives of Adidas, accusing them of making illicit payments to cash in on the vast riches generated at the sport’s highest levels.

Nike Inc. dominates basketball, generating $1.38 billion in revenue in the fiscal year ended May 31, 2016, in that category, and $1.29 billion in fiscal 2017. It sold a further $2.75 billion worth of Jordan brand gear in fiscal 2016, and $3.1 billion in fiscal 2017, much of which are basketball products.

Most sports categories Adidas steers out of its headquarters in Herzogenaurach, Germany. Its global basketball business, however, is run out of Portland, Oregon, headed by Kris Aman, after Chris Grancio left for personal reasons in September 2016. Through 2013, Aman had worked for more than 16 years at Nike, heading its basketball footwear business, among other posts. Under Grancio, Adidas set a goal to double the roster of NBA players it sponsors to 140 within five years. It currently has just under 100 players.

Adidas will spend about 2.5 billion euros this year on marketing. The proportion going to basketball is a “single-digit percent share” of this, the company said.

— With assistance by Eyk Henning

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