2016 IPO Prospects: Fanatics Expanding Its Playing Field

According to an IBISWorld report, the licensed sports apparel market in the US is estimated to have grown 6% annually over the period 2010 through 2015 to be worth $8.3 billion. The industry has been dominated by traditional players like Dick’s Sporting Goods and Sports Authority. Last week, Sports Authority announced that it was going bankrupt and planned to close 140 stores, nearly a third of its stores. Analysts believe that the company has not been able to keep up with the competition that is not only coming from other brick-and-mortar stores like Dick’s Sporting Goods, but also from other online stores such as Fanatics and Amazon.

Fanatics’s Financials

Jacksonville, Florida-based Fanatics was founded in 1997 when brothers Alan and Mitch Trager set up a digital storefront for their Jacksonville mall-based brick-and-mortar store of the same name. Since then, Fanatics has changed ownership a few times. After being bought by tech visionary Michael Rubin’s GSI Commerce, Fanatics became part of eBay when GSI Commerce was sold to eBay in 2011. A year later, Rubin bought out Fanatics from eBay and bundled it with an additional stake in Rue La La and ShopRunner under a parent company Kynetic. Kynetic is still the majority stakeholder in Fanatics.

Today, Fanatics claims to be the market leader for authentic, officially licensed sports merchandise offering the largest collection of gear from every pro and college team. It sells its merchandise online through more than 300 offline stores and through its fanatics.com, fansedge.com, and fanaticsauthentic.com sites. It also helps power e-commerce businesses for all major professional sports leagues, sports media brands, and over 150 collegiate and professional team properties. Its tie-ups with leagues also allows it to offer exclusive products to customers, helping it stand out from e-tail giants like Amazon and eBay.

Fanatics does not publish its detailed financials. According to market reports, nearly a third of its revenues is generated through the sale of products and the remaining comes from the digital and e-commerce services it provides to other sports leagues, media brands, collegiate and professional teams. The company is estimated to have recorded annual revenues of $1 billion in 2013 growing from $800 million in 2012. For fiscal 2010, when GSI bought Fanatics, it recorded revenues of $186.3 million and operating income of $23.8 million.

Fanatics has been venture funded so far with investments of $620 million from investors including Silver Lake Partners, Temasek, Alibaba, Insight Venture Partners, and Andreessen Horowitz. Its last funding round was held in August 2015 when it raised $300 million from Silver Lake Partners at an undisclosed valuation. Prior to this round, in June 2013, Fanatics had raised $170 million in a round led by Temasek and Alibaba at a valuation of $3.1 billion. It began raising VC funds in 2012 when it raised $150 million at an undisclosed valuation from Insight Venture Partners. Prior to the funding, it had raised $75 million in debt financing from Bank of America.

Fanatics’s International Growth

Fanatics is now looking to grow its geographical footprint. Last month, it announced the acquisition of UK-based Kitbag for an estimated $17 million. Like Fanatics, Kitbag is a sports focused e-commerce player. It has tie-ups with major sports teams and franchises including Manchester United, Real Madrid, Manchester City and Formula 1 and will help Fanatics make big inroads in the European and the global soccer-fans market. Also, similar to Fanatics, Kitbag runs the European online platforms for the NFL, NBA, NHL, and more than 25 other partners across motorsports, rugby, tennis, and golf. Unlike Fanatics though, Kitbag is a lot smaller with revenues of $47 million for the six month period ending September 2015.

The market may be waiting for Fanatics to go public, but its management appears to be in no rush for now.

This segment is a part in the series : 2016 IPO Prospects