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Does Under Armour Need Another Big Endorsement Deal?

By Nicholas Rossolillo - Oct 1, 2017 at 8:21AM

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In the world of athletic wear, who's wearing your gear matters -- and the company has star power sporting the UA logo.

NBA superstar and Nike (NKE -6.28%) pitchman Kevin Durant recently took shots at Under Armour (UA -2.57%)(UAA -1.39%) when he said "nobody wants to play in Under Armours." The comment hurts, especially as UA's business has faltered for the last year.

UAA Chart

Data by YCharts.

After the latest NBA finals, in which Durant eclipsed Under Armour's poster boy Steph Curry, many pundits said team Nike came out the victor. While it may seem like Nike is winning the war for top athletes, Under Armour investors should remain patient.

NBA star Kevin Durant holding a pair of his signature Nike shoes in red and orange.

NBA star Kevin Durant. Image source: Nike.

UA is holding its own

Kevin Durant moved in on Steph Curry's turf this year, and since then, sales of Curry's signature shoe have been falling. Notably, the man with the most valuable shoe deal for an active athlete is LeBron James, also a Nike endorser.

But looking past basketball shows that UA is doing just fine. The National Football League's Tom Brady, owner of the most Super Bowl rings among all quarterbacks in the history of the league, is team Under Armour. So are former NFL MVP Cam Newton, golf champion Jordan Spieth, Olympic skier Lindsey Vonn, and a slew of other elite names across a wide range of sports.

Simply saying that Nike is winning the top-athlete battle is misinformed. For an underdog and a much newer company trying to catch up to a well-established rival, Under Armour is doing a great job obtaining big names and growing sales. It's also worth noting that, while Nike may be winning the shoe battle right now, footwear is a relatively recent and still-small endeavor for Under Armour.

Under Armour Q2 2017 Segment Results

Segment

Sales

% of Merchandise Revenue

Year-Over-Year Growth

Apparel

$680.7 million

65%

11%

Footwear

$236.9 million

23%

(2%)

Accessories

$122.6 million

12%

22%

Data source: Under Armour Q2 2017 earnings results.

On recent quarterly earnings calls, CEO Kevin Plank has admitted that Curry's basketball shoes have been a learning experience. However, those recent struggles in footwear don't mean the company needs to land another big deal to save it.

Nike shows the way

In his memoir, Shoe Dog, Nike co-founder and longtime CEO Phil Knight talked about the struggle against Adidas -- the athletics king at the time -- and the role that endorsements played on his company's way to the top.

Nike got an early break when running phenom Steve Prefontaine donned the swoosh. That early win was cut short with Prefontaine's untimely passing in 1975 in a car accident. That wasn't the end for Nike, though. Investing takes time to realize big results and can be fraught with mistakes and setbacks -- the same goes for endorsement deals. For example, back in 1984, Nike signed a college basketball player by the name of Michael Jordan. Today, Jordan's line of shoes and athletic wear is still the biggest pro athlete deal ever made, generating $3.1 billion in sales in the last year.

Nike has thus shown the way to build a sports empire: steadily signing new talent and retaining it for the long term. As the new underdog in the world of sports, Under Armour is doing the right things to catch up to its bigger rivals.

Multiple images of NBA star Steph Curry dribbling a basketball in Under Armour gear.

NBA star Steph Curry. Image source: Under Armour.

While Under Armour should continue to sign new talent, a new blockbuster deal is not the only answer. Regardless of the Durant jab, the company should leave Steph Curry to continue to build on his superstardom to ensure the long-term viability of the Curry brand.

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Stocks Mentioned

Under Armour, Inc. Stock Quote
Under Armour, Inc.
UAA
$9.20 (-1.39%) $0.13
Under Armour, Inc. Stock Quote
Under Armour, Inc.
UA
$8.14 (-2.57%) $0.21
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$103.56 (-6.28%) $-6.94

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