John Wall Buyout Talks Are Another Stumble For Adidas Basketball

Forbes Finance 1 month ago
Washington Wizards v Indiana Pacers
John Wall is expected to miss the entire 2019-2020 NBA season after tearing his Achilles tendon.

Adidas has been on a roll. Annual revenue just hit $26 billion and growth since 2015 has been nearly twice as fast compared to longtime rival Nike. The stock price is up 31% over the last 12 months, twice the increase of the S&P 500.

But when it comes to basketball, the Three Stripes brand can’t get out of its own way. The latest bump in the road is a report from ESPN’s Nick DePaula that Adidas is in buyout talks with Washington Wizards point guard John Wall on the five-year endorsement deal the two parties signed in January 2018. The annual base pay on the contract is worth $4 million, according to industry sources.

Wall, 29, has struggled with injuries since signing the deal. He is expected to miss the entire 2019-2020 season after tearing his Achilles tendon in February. Adidas is likely looking at Wall as a sunk cost at this point and hoping to save a few million dollars by getting out of the deal now. Wall is in the first season of a four-year, $171 million contract with the Wizards.

Adidas flushing $20 million on Wall is a tough pill to swallow, but it is a drop in the bucket compared to its deal with Derrick Rose. The point guard was earning roughly $1 million a year from Adidas before winning the 2011 NBA MVP and signing a new shoe deal in 2012 with the German sports giant. The 13-year contract was expected to pay as much as $185 million, including bonuses and royalties.

But Rose tore his ACL shortly after the blockbuster contract and has struggled with injuries ever since. The D Rose 10, released in January, marked his tenth signature sneaker. Sales for his shoes have been weak since shortly after the injury. Sources say there were built-in reductions in Rose’ Adidas contract, but the base pay is still an estimated $11 million a year.

Adidas has other All-Stars to help fill the void of using Rose and Wall in its basketball marketing. James Harden and Damian Lillard were the two guards on the 2017-18 All-NBA team and are signed long-term with Adidas. Donovan Mitchell is a rising star with the Utah Jazz.

Sixteen percent of NBA players wore Adidas sneakers last season, per Baller Shoes DB, but they have failed to resonate in the marketplace. Nike is crushing Adidas and all of its competitors in basketball. Nike, including its Jordan Brand, has 86% of the U.S. basketball performance market in 2019, according to NPD analyst Matt Powell. Under Armour (6.9%) and Adidas (5.5%) battle for Nike’s scraps.

Adidas has had some success in the lifestyle basketball market, but still is looking up at Jordan. Jordan Brand revenue jumped 10% in the most recent fiscal year to $3.1 billion. “Jordan is being extended as more of a lifestyle brand,” says Cowen & Co. analyst John Kernan. “There is enormous potential. It can be much bigger than a $3 billion brand.”

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