Please ensure Javascript is enabled for purposes of website accessibility

Why Under Armour's MLB Deal Could Be a Home Run

By Bradley Seth McNew – Oct 22, 2016 at 5:41AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This major league deal won't start for a few more years, but it should give investors reason to get excited.

Image source: Under Armour

Under Armour (UAA -0.78%) (UA -1.25%) is officially going to be the uniform provider for Major League Baseball beginning in 2020, as reported by Sports Business Daily. Under Armour has been making its way into baseball for some time now, including sponsorship of baseball stars such as Bryce Harper, Clayton Kershaw, and Buster Posey. The company also made headlines earlier this year, when a patent for a concept shirt designed specifically for pitchers was filed. Here's why this new MLB deal could be a home run for Under Armour.  

What we know about Under Armour's MLB deal

Majestic Athletics, owned by VF Corp. (VFC -0.73%), has been MLB's uniform provider since 2005, but its contract ends after the 2019 season. Nike (NKE -0.21%) currently provides the players' under-layers. As the deal has been reported (though Under Armour and MLB have yet to put out official information on the deal), Under Armour will partner with sports-apparel company Fanatics to provide on-field uniforms, including jerseys and under-layers, for the MLB starting in the 2020 season. Headwear will continue to be provided by New Era.

Image source: Under Armour.

Terms of the partnership with Fanatics, the 20-year-old company that has become the largest online sports retailer that already manages MLB's online shop, have yet to be revealed, but this e-commerce partnership should bode well for Under Armour in getting a bigger footprint for its gear. Though the start of this deal is still a few years away, it gives Under Armour time to increase its baseball line and reap more publicity from Harper and other athletes, as well as increase its line of baseball gear. 

Why this has such major potential

Under Armour bid on becoming the uniform provider of the NBA last year, but it lost out to Nike, which outfits both the NBA and NFL. Adidas (NASDAQOTH: ADDYY) is the official outfitter of the NHL and MLS. Winning this MLB contract is the first time Under Armour has had a deal with one of the big five U.S. pro sports leagues. 

While the NBA and NFL have been looked at as some of Under Armour's biggest marketing opportunities, with NBA star Steph Curry and the NFL's Cam Newton each helping to show off Under Armour's gear, baseball could be one of the most lucrative leagues in terms of advertising. There are 2,430 MLB games played each season. Compare that with 1,230 for the NBA and 256 for the NFL. 

Another reason this could be huge for Under Armour is that it sets the ground for wrestling away similar deals with other professional leagues from Nike and Adidas in the future. Even though Under Armour didn't win the NBA deal, it did win rights to sponsor the NBA youth program called Jr. NBA. Under Armour is also the gear sponsor for the NFL Draft Combine. This MLB deal shows that Under Armour has the potential to eventually get the NBA and NFL-sized deals as well. 

As Under Armour continues to drive new partnerships, its visibility grows and helps the company to maintain its high sales growth rate, expected to grow 25% year over year in 2016 and another 50% through 2018. This MLB deal -- along with major university deals such as with UCLA and sponsorships of high-profile stars such as Dwayne "The Rock" Johnson -- should help Under Armour to continue to boost visibility and sales for years to come.

Seth McNew owns shares of Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Under Armour (A Shares), and Under Armour (C Shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.