Umbro records huge loss after settling dispute with licensee
UMBRO International, the Stockport-headquartered sportswear brand which was bought by Nike two years ago has been forced to shell out more than £20m to a former licensee to settle a contract dispute.
The figure is revealed in the lastest filed accounts for Umbro International, which show that despite a healthy increase in sales – up by 75% on an annualised basis to £130.9m in the 12 months to May 31, it posted a £41.4m loss.
In the previous 17-month period, the company, which supplies kit to the England team and Manchester City FC, generated £105.7m in sales and a £14.3m pre-tax profit.
Notes to the accounts explain that the company paid out more than £17.2m in an “arbitration award in relation to litigation with a former licensee”.
It also paid out £3m in legal fees as a result of the dispute. Other contributors towards the loss include a £3.4m writedown in an investment in a French business, £1.8m in restructuring costs and a £1.2m termination payment made to a former director.
The two directors to resign from the company during the period were former CEO Matthew Cook and Lewis Bird III, the former president of Nike’s Affiliates group.
A breakdown of its sales showed that the brand enjoyed its biggest growth in Nike’s home territory of the US, where they increased to £14.4m (2008, 17 months: £4.9m).
Meanwhile, sportswear giant Adidas managed a 3% growth in UK sales last year to £412.5m despite what it described as a “difficult” market, but profit dropped by 28% to £11.7m.
The company, whose UK headquarters is in Hazel Grove, Stockport, said that the main reason its profits were lowered was an onerous contract which cost the firm £3m.
During the year, the Adidas group closed the historic Bolton home of the Reebok brand it acquired in 2006, leading to 160 job losses.
At the time it said that some roles would be incorporated into Adidas’s Hazel Grove base, but accounts show that the average number of staff employed by Adidas (UK) – 60% of whom work in Stockport – dropped by 119 during the year to 901.
Market analyst Key Note Research is predicting growth in the UK sportswear market of 17.8% a year to 2013, when the parket will be worth £5.15bn.
It said that sportswear firms would benefit gfrom the baby boomer generation reaching retirement age and spending more on fitness activities to stay in shape – buying equipment for running, racket sports and golf, among others.
Its report also said that sportswear would remain firmly established as leisurewear, with shoppers continuing to wear trainers, tracksuits and other sports equipment as casualwear.
