Fanatics will be absorbing Nike’s college fan apparel manufacturing in an exclusive deal, the company told Yahoo Finance on Wednesday.
According to some Wall Street analysts, the move could potentially create further profit for the sports retailing giant.
“Typically when companies change suppliers, it is because they can get: Either more innovative, higher quality product, greater efficiencies, or the same product at a lower price,” Telsey Managing Director Cristina Fernandez told Yahoo Finance. “With this deal, it seems like Nike is getting an expanded assortment and faster speed to market, while allowing the company to focus on the marketing side.”
The college football outsourcing follows the path of existing partnerships between Nike and Fanatics for both NFL and MLB fan apparel. For Nike, which sold $3.3 billion in sports apparel last quarter, the move helps the company delve further into college sports gear. Once the manufacturing change takes effect in summer 2024, Nike plans to roll out more offerings with Fanatics, including an emphasis on women’s sports.
“We are proud to expand our long-standing partnership with Nike and implement our innovative vertical commerce model across their preeminent roster of universities,” Doug Mack, CEO of Fanatics Commerce and vice chairman of Fanatics Holdings, said in a statement to Yahoo Finance. “Our team is excited to maximize the value of Nike’s college partnerships by creating faster speed-to-market of fan gear through our agile supply chain, resulting in an expanded assortment of both timeless and on-trend Nike-branded merchandise for college fans and retailers everywhere.”
Ivan Feinseth, the Chief Investment Officer at Tigress Financial Partners LLC, highlighted college athletics as an attractive space for Nike given the wide-ranging fan bases. But more than the extended customer base, Feinseth argued that this partnership furthers Nike’s push to diversify its supply chain sourcing.
“They will outsource manufacturing when it makes sense,” he told Yahoo Finance. “And they also want to have a global supply chain because if anything the pandemic has taught us, having a China-dependent supply chain is just not good on many levels because of the rolling COVID issues, the increased volatility in relationship with the country and people’s perception of the relationship with the country, especially when they’re buying an American brand, American brand team.”
Fanatics, an e-commerce sports retailer among other practices, owns and operates its own manufacturer. This, combined with Nike’s rolodex of successful college partners — 51% of this year’s men’s and women’s 2022 NCAA March Madness teams were sponsored by Nike — could push the Oregon-based sports superpower further into college sportswear dominance.
With the already existing partnerships for MLB and NFL merchandise, Fanatics is now further embedded into Nike’s sports apparel business. Fernandez pointed out that this will likely be positive for Nike from a cost-benefit perspective while also furthering a broader narrative at the company to streamline merchandising.
“Nike has also been on a path to work with fewer, but better partners at retail which can be translating to consolidation in other parts of the business,” he said. “For Nike retail partners, the deal benefits them as the will be able to buy both Nike professional and college apparel and accessories from the same vendor, simplifying the buying process.”
Josh is a producer for Yahoo Finance.
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