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Are Arsenal in financial trouble?

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Gotta love “taking out the trash” on a Friday afternoon.

Inside A Mercator Poslovni Sistem d.d. Retail Store

Arsenal published it’s 2019-2020 financial results today, and uh, they paint a pretty bleak picture. The club lost £47.8 million after taxes, the second year in a row it has closed the books in the red after 16 straight years in the black. Obviously, the financial impact of COVID-19 closures and deferred broadcast revenues had a lot to do with the magnitude of the losses, but the club only attributed £35M directly to pandemic-related reasons.

That means even without the pandemic, Arsenal were on track to lose money again this season. It seems a bit of an exercise in fantasy to try to parse out what would have happened without the pandemic, but I’d call attention to how quick was to point out all the cost-saving measures implemented because of COVID-19 that have “ensure[d] the club is well placed to respond once the situation starts to improve.” That reads, at least to me, as “we did well to ensure that it wasn’t worse.”

That’s really not where you want your club to be financially.

And next year’s books will look worse. That £47.8M loss is for the fiscal year that ended in May 2020. We’ve had Project Restart and an entire season without fans in the stadiums that have not yet hit the published balance sheets. The Arsenal Supporters Trust predicted that the losses on the next set of financial disclosures could reach £158M. And oh by the way, the club has a £120M short-term loan from the Bank of England that comes due in May 2021, a.k.a. two months from now.

To be fair, Arsenal aren’t on the verge of financial collapse. At least I don’t think they are from the limited data points available to me. Nothing coming out of the club reads between the lines as “this is an emergency” quite yet. The club still spent significantly on Thomas Partey in the transfer window (although part of that spend was offset by selling Emi Martinez), and “the club continues to have the unwavering support and commitment of its parent company, Kroenke Sports & Entertainment, and its ultimate owner Stan Kroenke.”

And if we’ve learned anything from the the performance of the stock market during the pandemic, the ability of the rich to get richer, and the whole r/WallStreetBets stuff it’s that “money machine go brrrrrrr” is an accurate statement. And perhaps that’s a cause for relief because Arsenal might be “too big to fail.” So that’s something.

But as I wrote last year when they released the financials, I’m worried. Things were trending in the wrong direction then, and since, we’ve lived through a global pandemic that has more than decimated the financial side of football. A few months ago, I wrote about the interplay between transfers and finances, and how that has helped (well, hurt) to get Arsenal to where things are now (here and here).

As outgoing chairman Sir Chips Keswick said then, limited player trading profit and another season outside the Champions League is applying pressure to the club’s financial results.

Arsenal are more dependent on matchday revenue than the other big clubs in Europe according to Twitter football financials explainer @SwissRamble. So losing a season and a half of that revenue ain’t great. And the club had another transfer window this fall where they spent more than they brought in through sales. And they’re not in the Champions League this year, and almost certainly won’t be in it next year. And are you beginning to catch my drift?

As alluded to earlier, it looks as if Stan Kroenke and Co. are going to spend their way through the tough times, but I’d rather not have the financial future of the club depending mostly on the largess of Stan the Man.

There are underlying, structural issues that the club is still working to solve. They need to adapt the transfer strategy to a more sustainable model. They’ve made a lot of expensive purchases lately that haven’t panned out all that well and have been sold on for pennies on the dollar (or let walk for free). As indicated in this recent round of financial disclosures, they’re doing better in terms of commercial and sponsorship revenue. But they’re still lagging behind their competitors. Manchester United has an Official [pretty much everything]. Arsenal have yet to fully take advantage of that space.

And they’re still not in the Champions League. I cannot overstate the importance of getting back into and staying in the Champions League. It is a big club slush fund that, for years at Arsenal, papered over the cracks.

I’m sure @SwissRamble will break down the latest round of disclosures sometime in the coming days, and as always, TSF will have the key takeaways from his analysis (but y’all should go follow him because he does great work that isn’t just limited to Arsenal). Hopefully he’ll spot some cause for optimism because right now, I’m feeling pretty pessimistic about things. Mikel Arteta is improving things on the pitch but I worry that improvement may be stymied by club finances.

It’s tough times financially for everyone. And Arsenal, who were already headed in the wrong direction before COVID-19 took a sledgehammer to football finances, are definitely no exception.