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Why Is Under Armour Inc Getting Into NASCAR?

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When most people think of Under Armour (NYSE: UA  ) , they likely imagine the apparel-maker's football jerseys, its baseball gear, and during Olympic season, its speedskating suits. One sport the company isn't synonymous with is auto racing, but that may soon change. According to SportsBusiness Journal, Under Armour is attaching its brand to NASCAR.
The details of the deal
Although the financial details of the deal remain unknown, it could have a lasting impact on both sides. Under Armour will reportedly sponsor two racing teams: Michael Waltrip Racing and Hendrick Motorsports. Both are multiyear deals, and as SBJ's Tripp Mickle explains, they'll clothe "everyone from the pit crew to the front office."

Image via The U.S. Army, Flickr.

Unlike some NASCAR sponsorships, Under Armour won't outfit team drivers or cars -- Hendrick has Dale Earnhardt Jr., Jimmie Johnson, Jeff Gordon, and Kasey Kahne, for example -- but it can use their likenesses on gear.
Under Armour's strategy
So will we see a race-themed line of apparel? It's certainly possible, and because the average auto enthusiast is different from the company's normal customer base, it provides new marketing opportunities. Mickle notes the deal could help Under Armour improve sales of its outdoor apparel -- "NASCAR fans are more likely to hunt and fish than other sports fans," he writes -- and the advantages don't stop there.
As Nielsen's most recent "Year in Sports Media" report reveals, NASCAR's demographics are unlike any of the other major North American sports.

Nielsen "Year in Sports Media" report, 2013.

By the percentages, NASCAR has a larger female representation than golf, hockey, baseball, basketball, soccer, and football. And with nearly half of all viewers above the age of 55, auto racing's fan base is older than every sport except golf and professional football.
Diversity does continue to be a problem, but it's something NASCAR is working to fix by boosting its digital footprint -- it introduced a Twitter-focused social media campaign this winter, and launched NASCAR Connect, which lets fans make race predictions on Apple iOS devices, last month.
The business side of things
While Under Armour doesn't report financials by product type, its latest annual report cites training and hunting gear as a significant driver of recent expansion. In 2013, the company's net sales rose by nearly 30% to $2.2 billion -- the quickest growth in two years.
It's impossible to know exactly how much it's paying Michael Waltrip Racing and Hendrick Motorsports. But remember, Under Armour's NCAA football apparel deals typically range between $2 million and $9 million a year, and its entire annual sponsorship portfolio is likely at least $200 million. Given that, it's reasonable to think the company is willing to pay seven figures per year to get the UA logo into NASCAR.
The bottom line
At the end of the day, that's a small price to pay for a fan demographic unlike any other. NASCAR's efforts to inject youth into auto racing should appeal to current Under Armour customers, while the sport's existing fans -- especially those who are older -- should snatch up more outdoor apparel: a win-win for the company.

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Jake Mann

Jake Mann covers sports, economics and politics for the Motley Fool.

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8/28/2015 4:03 PM
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Under Armour CAPS Rating: ****