- Under Armour has beaten analysts' expectations during the first quarter of 2016.
- Under Armour is set to take advantage of Steph Curry's brand momentum.
- It is worth investing in Under Armour for the long term.
One company’s loss in another one’s gain and Nike's (NYSE:NKE) loss of Steph Curry to Under Armour (NYSE:UA) encapsulates that. Due to some mishaps, Nike failed to sign Steph Curry to a lucrative shoe deal in 2013, and Under Armour swooped in to encourage him to sign on their dotted line. In a fortunate series of events for Under Armour, the Golden State Warriors -the NBA team Curry plays for- is just about to complete a record-breaking year. Moreover, Steph Curry is being hailed as the modern-day Michael Jordan.
Under Armour’s growth driver over the next decade isn’t a more efficient product line, cost-savings etc. But how well they are able to leverage Steph Curry’s status in order to gain a stronger foothold and eat into Nike’s market share.
Uniquely, Curry’s brand is able to engage with different socio-economic backgrounds within Under Armour’s target market. This is exemplified by the fact that Steph Curry’s shoes sell more than that of Lebron James. Interestingly, Lebron was recently signed to a lifetime deal said to be worth a billion dollars. Steph’s brand is much bigger than Lebron’s was at the same stage in his career. Therefore, it seems as if Under Armour got Steph Curry for a bargain.
Steph’s appeal doesn’t just lie in the fact that statistically, he is one of the most accurate shooters in history, but also in the fact that he is smaller than the typical NBA player at 6”3. It is clear that his PR team have worked hard to craft a brand which is alluring for people from all walks of life. For instance, he is very open about his charity work, motivates his fans, and has managed to stay out of trouble.
This is perfect for Under Armour as they can use him as leverage to sell a range of items.
Under Armour sales
The insatiable demand for Curry footwear caused a 64% boost in footwear sales. Moreover, this adds to the fact that Under Armour has registered consistent growth over the past 6 years. The last time we saw such demand for the footwear line of an NBA player was at the peak of Michael Jordan’s NBA career and his “Air Jordan” line. With Steph Curry so young and relevant, Nike risks losing the cultural impact of the Air Jordan line to Under Armour.
Interestingly, the 2016 Olympic games are just around the corner, and Under Armour is likely to take full advantage to increase sales by using their flagship star.
Under Armour’s latest earnings report impressed Wall Street, causing an 8% rise in their stock price.
Interestingly, Steph Curry’s impact goes beyond basketball. The increased attention has triggered increased sales across Under Armour’s other product lines. For instance, accessories sales jumped 26.2% and licensing shot up by a significant 14.7%.
Furthermore, Under Armour’s impressive results weren’t foreseen by top analysts. For instance, Under Armour doubled Zacks estimate for quarter earnings (4 cents).
Steph Curry might be a growth driver, but it is challenging to predict just how big of an impact he could be. For one, being a human, one scandalous mishap picked up by the press could have a big impact on the entire Under Armour brand. His biggest draws lie in his fun personality and performance on the NBA court.
If Steph Curry turns out to be the next Michael Jordan, Nike would have made the biggest mistake of their existence, with some experts touting his worth to Under Armour at $14 billion.
In conclusion, Under Armour has an opportunity to use Steph Curry’s momentum as a global sporting superstar to boost their revenue, and strengthen their brand. Interestingly, the timing couldn’t be better with Curry enjoying a record-breaking year, and in an Olympic year too. Under Armour will take full advantage, and could release a special edition sneaker.
Under Armour is growing at an impressive rate, and is blowing Nike out of the water. Impressively, they were founded in 1996 and have since grown to a company with a market cap of more than 27 billion dollars. It is worth investing in Under Armour stock as a long option because signs show that they will continue to grow for the long term, and could even take the baton from Nike.