Under Armour and its rivals have pledged more than $1 billion to secure outfitting deals with top college programs. Now those megadeals are starting to pinch profits at the sportswear maker.
Source: Mega Contracts With Colleges Start to Pinch Under Armour – WSJ
Yesterday Under Armour encountered a crushing stock price drop. Today the recovery isn’t in motion and with last night’s crushing blow by the Spurs to the Warriors, while the Curry 3 ad was displayed on the display table most of the night, didn’t help.
Kevin Plank is wrong about the contracts with colleges as the reason for Under Armour not being able to sustain growth. I shared this a while back on the UCLA deal: http://www.arch-usa.com/insider-ties-armour-x-ucla/ The deal is worth 280 Million over 15 years. It is the largest deal in college athletics. http://www.latimes.com/sports/ucla/la-sp-0525-ucla-under-armour-20160525-snap-story.html
Consider that in 2014 UA’s marketing budget was 330 Million and this long term deal is over 15 years. That breaks down into about 18 Million a year. If the average price of the other colleges UA sponsors rings up at around 2 million (UCLA is a special circumstance) this is a fraction of their current marketing strategy. Under Armour has to pay to play. NCAA sports are the only sports that haven’t taken a hit on television. The NFL is down, MLB is inconsequential except around October, so the pending UA deal for MLB is good on the surface, but that’s another topic. The college budget isn’t the reason for Under Armour’s current issues. Under Armour’s problem/solution is simple: Better design, better story telling. No amount of marketing will save poorly designed product. On my own shop I sold out of the Curry 2. Many of the shoes sold for above retail. The Curry 1 and 2 were both solid performers, but if my shop is a microcosm of the bigger market, the 2.5 was a freaking disaster. The shoe consistently sold for less than retail and even Footlocker RTV’d the shoe in a variety of colorways. The wall at Kids Footlocker and Footlocker is non-existent and the marketing of the product is mediocre.
If you look at my Footlocker article I discuss why Footlocker’s stock is rising parallel to Nike. Footlocker understands the need to tell a story to the customer. Under Armour’s e-commerce, marketing, and design is one dimensional and offers zero connection to the product. I don’t think I’ve seen any passion in Under Armour since Ray Lewis was yelling “We Must Protect This House”. Under Armour isn’t connecting to their audience. They are relying on the retailer and Footlocker can’t sell a brand without a story. No one can.
