Investors and fans alike tuned in to Under Armour's (NYSE:UAA) investor day presentation on Sept. 16 to hear about all of the new products in the pipeline. Then Steph Curry, Golden State Warriors guard, 2015 NBA MVP, and UA sponsored athlete since 2013, made a surprise appearance on stage and pulled a paper from his back pocket. It was a signed contract keeping Curry as an Under Armour athlete through 2024. Shares of UA surged during the investor day presentation, rising 8% to a record $105 over the next 24 hours. Here's why investors are cheering the new Steph Curry Deal.
Steph Curry's rising star
Steph Curry was drafted to the Golden State Warriors in 2009 and initially signed with Nike. However, after it offered only a relatively small sum to keep Curry in 2013 ($2.5 million), Under Armour swooped in and signed him for an incredibly cheap $4 million a year for four years. At just over 6 feet tall and only 190 pounds, Curry was never expected to become the basketball star he is today. But that's just the kind of athlete story Under Armour likes -- the underdog story that resonates with the company's own story.
The Golden State Warriors won the 2015 NBA championship, and Curry was crowned the league's MVP of the season. Under Armour is taking full advantage of Curry's success to make its big push into the basketball segment, a market where, until this year, Under Armour was only a rookie. Just like the message in the company's new "Rule Yourself" campaign, relentless pursuit pays off, and Under Armour is setting itself up to continue scoring major points in its basketball segment.
UA basketball's breakaway
Consider that while Under Armour only serves about 1% of the basketball shoe market now, growing that market share to 10% would translate to a 400% increase in Under Armour's total footwear sales. According to Morgan Stanley analysts, Under Armour's basketball footwear sales jumped over 750% in the most recent quarter year over year, proving Under Armour's ability to chip away at Nike's estimated 95% basketball shoe market share.
The first big push toward making that growth a reality was the Curry One basketball shoe released in February of this year. The shoes performed incredibly well, selling out almost immediately and helping Under Armour reach a record $153 million in footwear sales in the most recent quarter.
Now that Steph Curry is NBA MVP, and Under Armour continues to get more and more respect on the basketball court, the company is ready to up its game.
Enter the Curry Two, Under Armour's newest basketball shoe that's set to be released in the U.S. on Oct. 24. Curry says that as he starts this next season, his third as an Under Armour athlete, he's confident the new shoes will help him keep his edge, saying, "I will be faster and stronger, and they look good, too."
Footwear made up only 14% of Under Armour's total sales in 2014, but the company expects that to rise to 22% by 2017, up to $1.5 billion a year. The Curry Two will play a major part in that sales growth, especially if Steph Curry can continue to be such a dominating player over the next couple of seasons.
UA for the win
Steph Curry isn't Under Armour's only bet in growing its basketball segment sales. The company recently signed deals with the NBA to be the title sponsor for the Jr. NBA as well as the NBA Draft Combine, a great opportunity for Under Armour to get its name onto the court while maintaining its underdog branding. UA also signed four new basketball players as of Sept. 18: Dez Wells, Jerian Grant, Delon Wright, and Wes Johnson.
Basketball isn't the only segment leading Under Armour's rapid growth. CEO Kevin Plank raised guidance at the recent investor day, saying the company expected to reach $7.5 billion in annual sales by 2017 led by growth not only in basketball, but in running, women's and youth sportswear sales, Connected Fitness, and more. The new deal with Steph Curry is just one more example of how well Under Armour is executing its growth strategy.
Bradley Seth McNew owns shares of NKE and UA. The Motley Fool owns and recommends NKE and UA, Try any of our Foolish newsletter services free for 30 days. 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.