English soccer club Chelsea is paying a significant amount to break its deal with Adidas.
Adidas, Europe’s largest athletic gear maker, has announced that it agreed to mutually end a sponsorship and sportswear supplier relationship with Chelsea Football Club six years before the pact was due to expire.
German-based Adidas said in a statement that the agreement would now end on June 30, 2017 rather than in June 2023. It said the mutual agreement was made to allow Chelsea Football Club “to enter a new equipment agreement with a competitor.” The rival wasn’t named, though generally, Nike NKE 1.72% and German-based Puma are the most active in signing sponsorship deals withPremier League teams.
Sponsorships with key teams and players play an important role in getting people interested in athletic brands, with gear worn for casual wear but also promoting the prowess of the brand within the world of sport. But those sponsorship pacts have gotten pricy in recent years, driven up by some competitive bidding.
In the U.S., Adidas says it has gotten more aggressive for sponsorships, recently signing deals with NHL PittsburghPenguins star Sidney Crosby and NFL Green Bay Packers quarterback Aaron Rodgers. It also recently shuffled the NHL partnership from the Reebok brand to sibling Adidas. Reebok and Adidas previously made apparel for the NBA and NFL but lost those contracts to Nike.
Adidas says that ultimately, it wants to focus on fewer deals but put a greater focus behind those initiatives.
In a separate statement, Adidas said it will book a significant payment made by Chelsea FC that would positively impact second quarter earnings on a one-time basis. To account for that gain, Adidas is now projecting net income from continuing operations to increase by around 25%, up from the prior target of between 15% to 18%.
