ugg store uk Under Armour is in hot pursuit of big endorsements
Losing out on signing NBA superstar Kevin Durant to Nike last week could have been a downer for Under Armour, but you wouldn’t know it from how the company, its stock and its founder reacted.
The Baltimore based sports brand released a video Tuesday, two days after Durant tweeted that he was staying with Nike, showing Gisele Bundchen walking into a gym decked out in Under Armour clothes and shoes.
With the signing of the Brazilian supermodel to represent its growing women’s line, the company’s stock surged 4 percent that day and ended the week up 6 percent at $72.53 a share.
Kevin Plank, Under Armour’s founder and CEO, likewise shrugged off the loss of Durant, saying it showed his company is prepared to do what’s necessary to get big future endorsements as it takes on its bigger sports apparel rivals.
“There’s no deal too big for us,” Plank said on Bloomberg TV in the only public interview he gave last week. “Our world has changed. We are the kids sitting at the Thanksgiving table saying, ‘I don’t want sit at the little table anymore. I want a chair at the big table.’ ”
For Under Armour, pursuing endorsements in two of its key growth areas sales of apparel and shoes to women and sales of footwear in sports with wide appeal such as basketball is crucial in elevating the brand globally, experts said.
Durant, the popular Oklahoma City Thunder forward who has long endorsed Nike shoes and apparel, would have been a coup for Under Armour as it tries to make inroads in the basketball shoe market. basketball market, while Under Armour’s share is estimated at less than 1 percent.
Under Armour, which had $2.3 billion in annual sales last year, is a relatively new player in footwear, where it started in football and baseball cleats. But basketball is the second largest athletic footwear category in the United States, accounting for $4.5 billion in retail sales last year, according to Matt Powell, a retail analyst and owner of Princeton Retail Analysis.
Under Armour offered Durant a reported $265 million to $285 million over 10 years. Not unexpectedly, Nike, which had offered him $200 million, exercised its right under its current contract with Durant to outbid a competitor and protect its investment. One report valued Durant’s Nike deal at up to $350 million over 20 years.
“Nike is a tough competitor, particularly in basketball,” said Howe Burch, president of Baltimore based TBC Advertising. “I’m sure they felt it was important to protect that and were willing to pay what they did.”
During the Bloomberg interview, Plank described Durant’s contract as a bigger than expected hit to Nike’s marketing budget, and thus a win for Under Armour.
“Do I take pleasure in that they paid $150 million more than they planned on paying?” Plank said. “Absolutely.”
And he may be right, analysts said.
“Because they were involved, they got Nike to spend more money than they wanted to, and that is a win for Under Armour,” Powell said. “I see not getting him as a win for Under Armour, because there is no way to get the return on this kind of investment. There’s just no way to monetize this size of contract for Nike.”
While it was not surprising that Nike outbid Under Armour,
“It was more telling to see how management in Under Armour responded to this by saying, ‘Look, we didn’t sign this guy, but this doesn’t mean that this is over,’ ” said Jason Moser, a senior analyst with Motley Fool One in Alexandria, Va. Under Armour is saying, “We’re going to be gunning for everyone we can that makes sense.”
Signing Bundchen, the world’s top earning supermodel and wife of fellow Under Armour endorser and New England Patriots quarterback Tom Brady, also made sense.
Better known for Victoria’s Secret lingerie than sports bras, Bundchen will help open the women’s market on a global scale to consumers who think of Under Armour as a compression T shirt company, analysts said. She not only enjoys international celebrity status but crossover appeal in fashion and fitness.
“Clearly, Under Armour is trying to broaden the breadth and depth of its products, but it’s an aspect of really trying to ramp up the global nature of the business,” said Auburn Bell, an affiliate professor of marketing at Loyola University Maryland. “Under Armour is at an inflection point in its growth. as it relates to a lot of categories but they’ve realized internally that international growth is a needed part of the strategy.”
Bundchen will be followed in early 2015 by other well known women representing the company in “I Will What I Want,” expected to be a continuing campaign for Under Armour’s women’s business, said Leanne Fremar, senior vice president and executive creative director for Under Armour Women.
The company’s biggest ever women’s campaign, launched over the summer, also features downhill skier Lindsey Vonn, ballerina Misty Copeland and others. It includes an interactive digital component that allows women to track fitness plans, share stories and follow the athletes.
Like Copeland and Bundchen, shown sporting Under Armour attire during a kickboxing workout in an ad unveiled Thursday, the new faces could include other women who are not professional athletes, Fremar said, part of a strategy the company has embraced as it aims to expand its $500 million women’s business into a segment that will rival or exceed the core men’s business.
“We continue to pursue athletes and now athletic females who have incredible stories and are incredible trailblazers in their field,” Fremar said. “We’re looking for a diverse group of women, all of whom have incredible life stories and are willing to share them with Under Armour and our audience and the consumer.”
Plank also made promises about big future endorsements in his television interview.
Moser said Under Armour investors have to be “thrilled” that Plank “responded as a person with a focus on the long term success of the company.”
“They know this is an important piece of the puzzle getting known athletes under their umbrella,” Moser said. “This is just getting started and [they] will continue getting big names and will pay for them because it does work. What they want to find is a couple of those signings with names that can be brands within the brand.”
Under Armour likely will pursue some higher ranking NBA players as their endorsement contracts expire while keeping a watchful eye on emerging college players, who can be riskier but less costly, Bell said.
“It would have made a huge statement for them to get [Durant] but at the other end of that, there’s opportunity, and they’ll continue to look,” Bell said. “Sooner or later they’re going to land somebody.
“They sort of put the stake in the ground and stated their goal that they are interested in the category,
” he said. “They want a part of the market share because it’s huge globally.”.