Sports Business Report: Rice Commission Recommends Summer Camps as Alternative to Shoe-Sponsored Tournaments

by 8 months ago

STANFORD, CA - JULY 31: Former US Secretary of State Condoleezza Rice looks on during the Agnieszka Radwanska of Poland and Maria Sharapova of Russia semifinals of the Bank of the West Classic at Stanford University on July 31, 2010 in Stanford, California. (Photo by Jed Jacobsohn/Getty Images)


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Rice Commission Recommends Summer Camps as Alternative to Shoe-Sponsored Tournaments

The NCAA Commission on College Basketball has recommended the installation of regulated summer camps to help offset the number of shoe-sponsored tournaments (think: AAU) that top prospects participate in. Seeking to stem the influence shoe companies have over players within the recruiting process, the Rice Commission has proposed regional events that would be run by USA basketball and supersede (in terms of talent/coaches attending) existing tournaments. The Commission isn’t recommending the elimination of all shoe-company sponsored events though, as the proposed camps would only account for +/- 15% of the prospects in a given class; USA Basketball CEO Jim Tooley explained, “our job is to help grow the game, not stifle it.” Recommendations are expected to be voted on within the next 30 days; if approved, the changes could be implemented in time for summer ’19.

Howie Long-Short: Nike, Adidas and Under Armour are all active on the travel basketball circuit, each running their own leagues.

On May 3rd, Adidas reported that efficiency savings drove bottom line growth +17% (to $647 million) in Q1 ’18. Accounting for currency effects, sales rose roughly 10% YoY (to $6.4 billion) with the company’s Adidas Originals line and running, training and soccer verticals driving the growth. North American sales rose +21% YoY and sales in China rose +26% YoY; Asia-Pacific (+15%) and Latin America (+10%) also experienced double-digit growth during the most recent quarter. NPD Group Analyst Matt Powell is reporting that “H1 footwear sales are up more than 20%; apparel even better.” The company will publish H1 financial results on August 9th.

Nike (NKE) reported fiscal Q4 earnings on June 29th. News of sales growth in North America (+3%) following 3 straight declining quarters, increased revenue growth guidance for fiscal ‘19 and a $15 billion share buyback plan sent shares rising +11% to an all-time high ($81.00). The share price has declined -4.5% since, closing on July 30th at $75.96.

Under Amour (UAA) is the most recent shoe/apparel company to post financials, having done so on July 26th. While the company’s U.S. business failed to gain much momentum (+1.6% YoY), international sales surged (+28% YoY) during Q2 ‘18 and the company managed to reduce excess inventory; news that was welcomed by investors, as shares rose 5% on the report.

Of course, Q2 wasn’t a “victory” for UAA, the company reported a quarterly net loss of $95.5 million and announced it would be committing another $80 million (in addition to the $130 million it already committed) to its long-term restructuring efforts. Despite the heavy spending on a turnaround (focus going from men to women/kids, $80-$100 price point) and continuing headwinds (think: leisure over performance), UAA shares are up +39% YTD; closing on Monday at $20.11.

Fan Marino: The NCAA is likely to continue allowing coaches to attend shoe-sponsored tournaments in April (at least for now), so the Commission’s recommendations are just for the July recruiting period. While that makes little sense (and is unlikely to curb corruption), the NCAA is already complaining that the $9 million price tag to replace the summer’s recruiting events is prohibitive; they certainly won’t go for the spring events too, at least not now. It’s tough to pity the NCAA though knowing the organization takes in +/- $1 billion in media rights revenue annually through 2032.

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MGM Resorts, Boyd Gaming Form “Unprecedented” Online Gaming/Sports Betting Partnership

It was a busy Monday for MGM Resorts International (MGM) as the company confirmed reports of a joint venture with GVC Holdings (as discussed in yesterday’s newsletter) and announced an “unprecedented” online gaming/sports betting partnership with Boyd Gaming (BYD). Combined the two companies will maintain brick and mortar casinos in 15 states, with both being able to offer online and mobile gaming in jurisdictions where either is licensed to operate; GVC technology will power their platforms. The market access agreement with BYD gives MGM the ability to “expand our entertainment options for guests (30 million life Rewards members) beyond their visits to our land-based resorts” (think: sports betting, iGaming, poker); Boyd picks up the “opportunity to potentially an add an online presence in 5 additional states.”

Howie Long-Short: This deal puts MGM and BYD on an even playing field with Penn National Gaming (PENN) and Caesars Entertainment Corp. (CZR), which operate in 15 and 13 states, respectively. Speaking of Caesars, the company announced it would introduce land-based sports betting in both NJ (begins Tues at The Bally’s, Wednesday and Harrah’s) and Mississippi (first to offer in MS) prior to the start of the football season. CZR sportsbooks are powered by Scientific Games (SGMS) technology.

As for BYD, the company reported Q2 earnings on July 26th. Revenues (+2% to $616.8 million) and EBITDA (+8% YoY to $163.4 million) grew across every sector of the business and “companywide operating margins reached record levels.” Shares rose +1.5% on Monday’s news, closing at $35.92

Fan Marino: Everything is turning up Aces for MGM (pun intended), as the Las Vegas WNBA team owned by MGM Resorts International has been awarded the 2019 WNBA All-Star Game.

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While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related business news, in easily digestible bites, with commentary from both the sports money and sports fanatic perspectives.

We’ll cover publicly traded professional teams & stadiums (MSG, RCI, BATRA, MANU), television networks (DIS, FOXA, CMCSA, CBS, TWX, MSGN), apparel & footwear companies (NKE, UAA, ADDYY, FL, LULU), equipment companies (GOLFELY, FIT), ticketing companies (EBAY, LYV) content and facilities providers (CHDN, DVD, ISCA,TRK, LMCA).  If it trades on Wall Street, and has a sports angle, it’s in our wheel house.

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TAGSAdidasCollege BasketballNikesports bettingsports finance reportUnder Armour