Manning’s move may help Nike as it takes NFL contract

Peyton Manning’s change of address is likely good news for Nike Inc., which replaces Reebok International Ltd. next month as the maker of National Football League-branded apparel and uniforms.

Manning, whose No. 18 jersey has been among the NFL’s top 10 sellers since 2004, was released Wednesday by the Indianapolis Colts, ending a record-setting era for a quarterback that resulted in a Super Bowl championship, four Most Valuable Player awards and at least three neck surgeries.

Having a player of Manning’s ability and popularity changing uniforms is a boon for Nike, which won’t only sell a lot of jerseys but utilize the offseason news to remind consumers of its relationship with the most popular sports league in the U.S, according to Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri.

“It can’t hurt that the league is getting attention in the offseason in light of Manning’s move,” said Arnold, who recommends buying the shares, which he doesn’t own. “It’s a very, very popular league and he’s a very, very popular player.”

Reebok, which was acquired by Adidas AG in 2006, has held the NFL license since 2001. Reebok-Adidas operates a plant on the east side of Indianapolis that churned out an estimated $200 million in annual revenue from NFL merchandise. The company is looking to replace the business by expanding other business lines. 

Financial terms of the league’s five-year apparel contract with Beaverton, Ore.-based Nike, the largest sporting-goods maker, weren’t disclosed when it was announced in 2010. Advertising Age, citing executives close to the NFL, said the agreement is worth about $35 million a year. Nike’s revenue through November was $22.7 billion.

Matt Powell, an analyst with Charlotte, N.C.- based SportsOneSource, a research firm focused on the sporting goods industry, says Nike will reap about $500 million this year on the sale of NFL merchandise because retailers allowed their Reebok inventory to wane in anticipation of the company switch.

“This is a big deal for Nike because retailers are going to have to fill up their racks again,” Powell said via telephone. “Add on top of that a player like Manning changing teams, that’ll help also.”

Manning, 35, joined the Colts in 1998, blossoming into one of the league’s best and most marketable players. Consumers rated New Orleans Saints quarterback Drew Brees and Manning last year as the most marketable players in the NFL, according to the Marketing Arm’s Celebrity DBI, an index that quantifies consumer perceptions of more than 2,800 celebrities. Manning, whose passing yards, completions and touchdowns are third on the NFL career list, was rated as the league’s most recognizable player.

Manning has a 19-percent change of signing with the Arizona Cardinals, according to the Cal Neva Resort’s sports book in Reno, Nev. The Miami Dolphins are second, ahead of the Washington Redskins.

Elite players who switch teams usually sell a lot of jerseys. Brett Favre, whose jersey was the No. 1 seller from April 2008 to March 2009 following his move to the New York Jets from the Green Bay Packers, ranked third the previous year, according to the NFL.

Manning’s jersey ranked 18th among best sellers from April 2011 to February 2012, even though he didn’t play last season while recovering from neck surgery.

“It’s going to be exciting as a company watcher and consumer to see what Nike brings to the NFL in terms of merchandise,” Arnold said.

By cutting Manning today, the Colts avoided having to pay him a $28 million bonus. Indianapolis, which was 2-14 last season, has the top pick in the draft and will select Stanford University quarterback Andrew Luck.

The Nike contract doesn’t include hats, which was part of the Reebok agreement. NFL-branded hats will be made by New Era Cap Co. Manning is a Reebok endorser.