Around three months ago nobody on the Manchester United Plc (NYSE:MANU) quarterly investor call asked executive vice chairman Edward Woodward whether he would sack Louis van Gaal as the team’s manager.
A disastrous run of poor form over the Christmas and New Year period had left the club struggling outside qualification places for next year’s lucrative Champions League competition, and the Dutch coach’s future was apparently in very serious doubt.
Barring a chance to win the FA Cup later this month, little has changed since then.
Daily headlines through the mainstream press have portrayed van Gaal’s departure as an inevitability, one that will clear the way for the previously special one Jose Mourinho - the Portuguese is himself out of work following the axe at Chelsea following its dramatic fall from grace.
As the February investor call took place United were already way off the championship pace - set by eventual fairy tale winners Leicester City – but, for the money men backing the Red Devils that was unlikely to have been much of a concern.
United’s standing as one of Europe’s truly elite teams all but retired with Sir Alex Ferguson back in 2013.
The reputations of many behind the scenes at Old Trafford are now forged on a different kind of success. More recently, accomplishment has not been measured in trophies but by commercial partnerships and kit deals.
That is what keeps Manchester United in the top bracket of football’s money league.
Forbes magazine just today placed Manchester United as the world’s third most valuable club with a valuation of £2.3bn – putting it just behind Real Madrid and Barcelona (worth £2.52bn and £2.46bn respectively) but still around £500mln ahead of German champions Bayern Munich which, in fourth spot, was said to be worth £1.85bn.
In positions five through eight came United's English rivals Arsenal (£1.4bn), Manchester City (£1.3bn), Chelsea (£1.15bn) and Liverpool (£1.07bn), meanwhile 2016 Premier League runners up Tottenham are seen by Forbes as the world’s tenth most valuable club at £704mln.
Meanwhile on Wall Street, priced at US$16.72 per share, Manchester United’s market capitalisation equates to about £1.6bn - that's after a 6% fall in the year to date (but shares have actually traded as low as US$13.30).
Perhaps this lofty valuation is behind the apparent calmness among the bean counters following NYSE quoted MANU. But one very recent event may change that.
A potentially terrifying event for Manchester United shareholders occurred in London this week.
It wasn't the bottling of the team bus by hooligans. Nor was due to the player's bottling it as they lost to West Ham. It is not even the strong likelihood the club will now fail to qualify for next year’s Champions League.
The warning shot comes from events in the West of London, not the East.
Adidas on Wednesday announced it had decided to cancel its partnership with Chelsea some six years ahead of schedule, ending after the 2017 season rather than 2023.
United's record breaking kit deal with Adidas - a deal worth £750mln subject to achievements like participating in the Champions League - is the jewel in the club’s commercial crown.
JP Morgan analyst Chiara Battistini, in a note, highlights that the jettisoning of the Chelsea arrangement was consistent with the German sportswear group's strategy to focus more closely on a small number of large football clubs, ones like United.
That might reassure some, but it begs the question of how long the Manchester club can continue to underperform before Adidas considers it too 'small'.
Speaking about United’s performances back in January, Adidas CEO Herbert Hainer was quoted as saying it was “not exactly what we want to see” and admitted he had hoped the team would play a better brand of football.
Past glories have been allowed to fall by the wayside, but a poor commercial performance is less likely to be tolerated.
Nomura analyst Mathew Walker estimates missing out on next seasons Champions League will cost United around £5-6mln of earnings (less than some estimates, because Nomura factors in that player wages will be lower too).
Woodward clearly faces some tough questions – but don’t anticipate many during the investor call following Friday’s third quarter results.
** Scheduled City announcements for Friday
Interims: New Europe Property Investments plc (LON:NEPI)
Trading statements: Coca-Cola HBC (LON:CCH)