Under Armour is on an insane endorsement deal hot-streak - Yahoo Finance
Everyone on the Internet was talking about Under Armour this week— and the talk was good.
According to an ESPN report, Under Armour (UA) almost never scored its current star athlete, Golden State Warriors guard Stephen Curry. It got Curry thanks to a nice assist from Nike (NKE), which had the athlete on its roster since 2010 but in 2013 bungled a pitch meeting and lost him forever. In the meeting, a Nike executive mispronounced Curry’s first name (he said “Steph-ON,” but the right way is “STEPH-in”) and a presentation they showed Curry and his father, Dell, had Kevin Durant’s name on it. Nike did not respond to a request for comment.
Signing Steph Curry has been a smash success for Under Armour. Sales of his signature basketball shoe are up 350% since the start of the year, and are higher than sales of any Nike signature shoe except for Jordan. When Under Armour signed him in 2013 it was for $4 million per year—a steal, in retrospect. Last year it extended his deal through 2024, for an undisclosed annual amount, and gave him an equity stake in the company. (Tom Brady’s deal includes one as well.) Curry’s Warriors won the NBA Finals last year, and now look almost certain to do it again. He is having a season unlike anyone else in the NBA. And every game in which he performs magic brings more buzz to Under Armour.
But Curry is just one part of Under Armour’s current hot streak in athlete endorsements. CEO Kevin Plank, who founded the company while he was still a football player at the University of Maryland in 1996, is doing everything right when it comes to sponsorship deals. The company has not only signed the right players, but at precisely (uncannily, even) the right time. And it has then marketed them cleverly after signing them.
Take Jordan Spieth, the No. 1 golfer in the world for the past 26 weeks. Under Armour signed the young Texan in 2013 after he graduated from college and turned pro—likely a small deal, what is often called an “equipment deal,” meaning that the fee is negligible and mostly consists of supplying free apparel and equipment to the athlete. It was a prescient move. At The Masters in 2014, Spieth tied for second. He was only 19. Under Armour quickly reacted: in January 2015 it signed him to a new deal, reportedly worth $20 million a year. It was the right bet: He went on to the win The Masters that year – and the U.S. Open. And he tied for second at the PGA Championship. And he tied for fourth at the British Open. Spieth has drawn comparisons to Tiger Woods in terms of what he could do for the sport of golf—that may be wishful thinking, but Spieth, along with Rory McIlroy (Nike), Jason Day (Adidas) and Rickie Fowler (Puma), is certainly the leader of an exciting group of young stars bringing new eyeballs to golf. And Spieth will aid Under Armour's ambitions of becoming a major golf apparel brand. (Under Armour also sponsors golfer Gary Woodland, and wasn't pleased that the Under Armour name wasn't visible on his underwear when he took his pants off at a recent tournament.)
In addition to Curry and Spieth, Under Armour signed ballerina Misty Copeland in 2014. The value of the contract is not public, but she has said it pays her more than ballet, and she is thought to make around $100,000 a year from ballet. A ballet dancer may seem like a surprising choice for a scrappy apparel company that made its name with a tight undershirt for football players. But Copeland’s fame goes beyond dance: she launched a diversity project to find more black ballerinas; she is the subject of a documentary partially funded on Kickstarter; she wrote a memoir. Her signing made Under Armour look hip.
Under Armour knows what it suddenly has on its hands: a roster of hot young stars all crushing it in their respective sports. And so it rolled out its new ad campaign, “Rule Yourself,” by putting three of them together in one spot that it debuted last summer. Curry, Spieth and Copeland are shown practicing their craft—and practicing, and practicing—sending a message about getting in your reps, and the relentlessness of honing an athletic skill. Then it gave Tom Brady, now its veteran star, his own similar spot.
Separately from what it is doing with the young, newer stars, Under Armour also uses Brady wisely; just when some fans might forget that he’s an Under Armour athlete, it will bring him out again to remind them. And now it is doing the same with swimmer Michael Phelps. The swimmer has been signed with Under Armour since 2010, but for the past few years it hasn’t exactly trumpeted the star—he has been in and out of rehab, and for a period of time showed up in more tabloids than in sports magazines. Now the 18-time gold medalist, who had initially announced his retirement from pro swimming, is back for one more Olympics, training for the Summer Games in Rio. And Under Armour is on the case. This month it debuted a new ad spot with Phelps that sticks to the “Rule Yourself” theme and shows the brutal routine of an Olympic swimmer. The ad is inspiring, and like the others, it cements the brand image of Under Armour as hard-working, gritty, tough.
That brand image may have to step up and replace the long-time notion of Under Armour as underdog. With a market cap of $17 billion, the 20-year-old company is no longer an underdog. It surpassed German giant Adidas as the No. 2 in U.S. sports apparel. Its stock is trading at 50 times earnings. If Plank’s initial aim to “take on Nike” back in 1996 sounded insane at the time, it now looks plausible. Under Armour is still much smaller by revenue, but it is growing at a rapid rate. Its revenue grew 31% last quarter, beating estimates by $50 million. It beat estimates on its earnings per share as well, and raised its revenue forecast for 2015 to $4.95 billion. Nike, by contrast, missed expectations on revenue last quarter.
In other words, the endorsement-deal hot-streak is no mere marketing tool for Under Armour: it’s working for the company, perhaps even accounting, partially, for the stock performance. Nevertheless, athlete sponsorship is still a risky game. Adidas, for example, went all in on Chicago Bulls player Derrick Rose, signing him to a fat new deal ($260 million over 14 years) in February 2012 just weeks before he got injured in April and missed nearly two full seasons. An injury could bedevil one of Under Armour’s athletes at any time. Or it could simply miss out on the next huge star if Nike or Adidas gets there first. (Or some other brand, even—little-known Japanese clothing brand Uniqlo boasts a head-to-toe deal with men’s tennis world No. 1 Novak Djokovic.)
But here's one thing it likely won’t do, after the world has learned of Nike’s error: use the wrong name on a presentation when it woos the next potential signee.
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Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology.
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