UnderArmour Is Blowing Up

[Tugg Speedman]

I think UA is wrong on this.  This is not the way to reach this "elite group."

Sounds like they employ too many Yale alums and they want to support their Alma Mater.

January 12, 2016 — 1:11 PM CST
Why Under Armour Is Paying Big Ten Money to Sponsor Yale Sports
    Apparel deal is said to be worth $16.5 million over 10 years
    More per year than Nike pays Illinois, Rutgers, Iowa State

http://www.bloomberg.com/news/articles/2016-01-12/why-under-armour-is-paying-big-ten-money-to-sponsor-yale-sports

Under Armour announced a new deal with Yale Athletics Monday, and while the terms were not officially disclosed, a person with knowledge of them said the Baltimore-based apparel company will pay $16.5 million to outfit the Bulldogs for the next 10 years.

That’s more per year than Nike Inc. pays to outfit Rutgers or Illinois, according to the Portland Business Journal’s contract database, and dwarfs the $460,000 Nike pays Iowa State -- all major-conference programs whose basketball and football teams regularly appear on national TV, giving their sponsors’ logos valuable visibility across the U.S.

Yale can’t offer that. The Ivy League’s television deals are limited compared with the NCAA’s biggest conferences. No matter how much talent the Bulldogs recruit, they won’t qualify for the College Football Playoff.

So what’s in it for Under Armour? The Yale brand, said Under Armour Vice President of Sports Marketing Ryan Kuehl, who cited the powerful alumni network, its global footprint and its elite student body.

"The number of young people around the world who aspire to attend Yale University is mind-boggling. That aspirational positioning made the deal worth it," Kuehl said.

Of that $16.5 million, $2.5 million will be spent on marketing and brand exposure for Yale, according to the person, who asked to remain anonymous because the terms were not made public. That would allow Under Armour to use the Bulldogs in its advertising, for example. Kuehl and Patrick O’Neill, Yale’s associate athletic director for marketing and licensing, declined to comment on the terms of the deal.

[MU Fan in Connecticut]

I saw that in the local paper over the weekend and was going to share.
Interesting.

[Skatastrophy]

Under Armour has done a fantastic job of identifying and retaining upcoming talent in pro sports over the past decade.

The number of Y hats you see around the world is as high or higher than the number of Harvard sweatshirts. A UA logo on each of those will go a long way to furthering their brand. Nobody watches american football outside of the US because it's a boring sport, but people all over the world aspire to attend Yale University.

I think this aligns with their endorsement deal with Tottenham (another great pickup imo, but I'm a Spurs fan so I may be jaded).

https://www.underarmour.com/en-us/ua-roster

[Stronghold]

Under Armour has done a fantastic job of identifying and retaining upcoming talent in pro sports over the past decade.

The number of Y hats you see around the world is as high or higher than the number of Harvard sweatshirts. A UA logo on each of those will go a long way to furthering their brand. Nobody watches american football outside of the US because it's a boring sport, but people all over the world aspire to attend Yale University.

I think this aligns with their endorsement deal with Tottenham (another great pickup imo, but I'm a Spurs fan so I may be jaded).

https://www.underarmour.com/en-us/ua-roster

Oh come on

[Dan]

Most people I see with a "Y" on their hats are LDS.

[Skatastrophy]

Oh come on

That is the reason. It's built for commercials with constant breaks in the action. The rest of the modern world is used to soccer. No breaks in the action, no commercials.

[GGGG]

Yale's deal is about a third of Wisconsin is slated to make from UA.  The only reason that it is "Big Ten money" when compared to schools like Illinois and Rutgers is because those two are working on older contracts.

[MU Fan in Connecticut]

I am occasionally asked by friends and family, "can you pick me up a Yale t-shirt?"

[Tugg Speedman]

I am occasionally asked by friends and family, "can you pick me up a Yale t-shirt?"

Below was mentioned in D Wade goes to Harvard thread.

Is it wrong?

If not, does it apply to Yale?

“I can’t wait to put on that Harvard sweater," Wade said

http://www.bloomberg.com/news/articles/2015-06-12/dwyane-wade-goes-to-harvard-craves-ivy-league-swag

Maybe it's just me, but anyone wearing an item of Harvard apparel without being a student/alumnus/parent is a tool.

[GGGG]

It doesn't really apply to Harvard either except in Grayson's mind.

[Tugg Speedman]

That begs a question.

If you see someone wearing a Power 5 or Big East T-shirt walking down the street.  What do we assume?  They are a fan of that school's revenue sports teams and/or student/alumni/parent.


What do we assume if someone is wearing a Ivy (or University of Chicago) T-Shirt?  That they are fan of the team? How big a universe is this?  I'm guessing "not very." Most likely we assume they must be a student/alumni/parent?

If the universe of Ivy swag is largely student/alumni/parent, then did UA pay too much?  How does this universe of swag buyers translate into larger UA sales?

[Stronghold]

That begs a question.

If you see someone wearing a Power 5 or Big East T-shirt walking down the street.  What do we assume?  They are a fan of that school's revenue sports teams and/or student/alumni/parent.


What do we assume if someone is wearing a Ivy (or University of Chicago) T-Shirt?  That they are fan of the team? How big a universe is this?  I'm guessing "not very." Most likely we assume they must be a student/alumni/parent?

If the universe of Ivy swag is largely student/alumni/parent, then did UA pay too much?  How does this universe of swag buyers translate into larger UA sales?

Ivy schools (Harvard, Yale, Princeton in particular because they are the most well known in the public eye) will always be considered elite academics.  Power 5 conference teams could possibly only take a few years to fall out of elite status in a sport.  Granted a lot of UA gear is sports related so I don't know if their investment will be worth it. Not saying I disagree with you but this is the only conclusion I could come up with.

[muwarrior69]

That begs a question.

If you see someone wearing a Power 5 or Big East T-shirt walking down the street.  What do we assume?  They are a fan of that school's revenue sports teams and/or student/alumni/parent.


What do we assume if someone is wearing a Ivy (or University of Chicago) T-Shirt?  That they are fan of the team? How big a universe is this?  I'm guessing "not very." Most likely we assume they must be a student/alumni/parent?

If the universe of Ivy swag is largely student/alumni/parent, then did UA pay too much?  How does this universe of swag buyers translate into larger UA sales?

One per centers anyone?

[Herman Cain]

This is $50,000 per sport  per year. Not really a huge premium over the cost of product .

[Tugg Speedman]

This is $50,000 per sport  per year. Not really a huge premium over the cost of product .

What cost over what product?

[Herman Cain]

What cost over what product?

Each sport has uniforms equipment etc that Under Armour is providing as part of the deal. Home. Road, practice , warm ups, accessories etc.

[Chicos' Buzz Scandal Countdown]

I feel like it makes a lot of sense to align with any strong brand. I'm sure this is listed sow where but I'll but the Yale brand as more Valuable than Illinois or Rutgers any day of the week, regardless of athletic success.

[Tugg Speedman]

Under Armour has done a fantastic job of identifying and retaining upcoming talent in pro sports over the past decade.

The number of Y hats you see around the world is as high or higher than the number of Harvard sweatshirts. A UA logo on each of those will go a long way to furthering their brand. Nobody watches american football outside of the US because it's a boring sport, but people all over the world aspire to attend Yale University.

I think this aligns with their endorsement deal with Tottenham (another great pickup imo, but I'm a Spurs fan so I may be jaded).

https://www.underarmour.com/en-us/ua-roster

One year later and UnderArmour (UAA) is now a complete mess.  Executives are quitting left and right, they are way over their skis on licensing deals.  Losing money and they really don't know what to do.

The first chart is the last year, yes, it is down 25% today and has been cut in half since September.

The second chart is the last four years (cannot see it on this chart but $21 is where it is trading now).

Most likely Seth Curry has made little to no money on his deal with them.

[brandx]

One year later and UnderArmour (UAA) is now a complete mess.  Executives are quitting left and right, they are way over their skis on licensing deals.  Losing money and they really don't know what to do.

The first chart is the last year, yes, it is down 25% today and has been cut in half since September.

The second chart is the last four years (cannot see it on this chart but $21 is where it is trading now).

Most likely Seth Curry has made little to no money on his deal with them.

You use the same argument that Chicos used to say Netflix was a failure. I begged to differ then and still do.

Nike and Adidas are the clear leaders. For any other company to join those two at the top meant there would have to be a huge outlay of cash to sign big stars. That means bad news for the bottom line - but probably only temporarily. It takes time to compete with the big boys and get attention.

But, anecdotally, I see an awful lot of UA now on kids. I saw none just a couple years ago. My grandson is playing this summer on a traveling team with mostly kids from one of Caron Butler's teams. When I pick him up - I see more kids dressed in UA gear than Nike and Adidas combined.

So, I am not arguing with the current state - I just differ in that I don't see it as the final outcome.

BTW, I seriously doubt that Seth Curry has ever had a shoe contract.

[4everwarriors]

Don't tell Jordan Spieth. He'll bee pissed, hey?

[Tugg Speedman]

You use the same argument that Chicos used to say Netflix was a failure. I begged to differ then and still do.

Nike and Adidas are the clear leaders. For any other company to join those two at the top meant there would have to be a huge outlay of cash to sign big stars. That means bad news for the bottom line - but probably only temporarily. It takes time to compete with the big boys and get attention.

But, anecdotally, I see an awful lot of UA now on kids. I saw none just a couple years ago. My grandson is playing this summer on a traveling team with mostly kids from one of Caron Butler's teams. When I pick him up - I see more kids dressed in UA gear than Nike and Adidas combined.

So, I am not arguing with the current state - I just differ in that I don't see it as the final outcome.

BTW, I seriously doubt that Seth Curry has ever had a shoe contract.

If you do a simple technical analysis of S&P 500 companies that lose 50% in three months, or 25% in a day, history says it will be many years before this stock will see $55 again, if ever.  History says they are going to struggle for years.

This is critical because they were getting Seth Curry and Jordan Speith precisely because they were not paying them money,  They were giving them stock options because the athletes (and their agents) thought stock would be worth a lot more than cash.

Now that Speith and Curry are holding a piece of crap stock, future athlete are going to demand hard cash instead of stock.  They don't want to be in Curry or Speith's position.  So UAA lost its currency that allowed it to sign mega-stars without outlaying actual money.  Now they have to pay up.

Revisit this in a few years.  It's Disney only far worse.

[🏀]

Their golf pants are fantastic though.

[Tugg Speedman]

Bondholders Sweat as S&P Cuts Under Armour’s Credit to ‘Junk’
Downgrade follows weak sales during the holiday season

http://blogs.wsj.com/moneybeat/2017/02/01/bondholders-sweat-as-sp-cuts-under-armours-credit-to-junk/

S&P Global Ratings lowered Under Armour Inc.’s credit rating to junk status a day after the company posted disappointing sales during the pivotal holiday shopping season.

[StillAWarrior]

But, anecdotally, I see an awful lot of UA now on kids. I saw none just a couple years ago. My grandson is playing this summer on a traveling team with mostly kids from one of Caron Butler's teams. When I pick him up - I see more kids dressed in UA gear than Nike and Adidas combined.

I find your comment interesting because your anecdotal experience could not possibly be more different than my own.  I'm sure it could be regional, and I also suspect that it could be related to which sport someone is involved in.  I have four kids, ranging from 13 to 20, and in my experience Under Armour has completely disappeared.  I find this particularly interesting in light of my post ten years ago talking about the extraordinary popularity of Under Armor and its plans on "world domination."  Looking at that post, they did eventually manufacture "regular athletic shoes" and my kids did want them.  And, incidentally, hated them (as did my wife).  Looking back, I'd say that Under Armor has been completely off my kids' radars for at least five years, maybe longer.  I can't remember the last UA product I purchased.  Even that was almost certainly an actual under garment, which I think UA did quite well.  My kids have been strongly in the Nike camp for years (although my son dabbles in Adidas with soccer clothing), and I've frequently commented at their basketball games that Nike seems to have nearly 100% of the shoe market in youth and high school basketball around here.

In short, I virtually never see kids wearing any sort of UA gear any more.  Given what I was seeing happen ten years ago (and posting about), I find the drop-off completely astounding.

[Tortuga94]

I've been looking for a reason to buy UAA, this recent sell off may be it. There is still a lot to like from the company. It grew revenue at 22%, footwear revenue grew 36%, international sales increased by 55%(60% if you factor out the strengthening dollar), BTW international sales only make up about 15% of revenue so there is plenty of room for growth there. Direct to consumer revenues were up 27% that now accounts for 30% of the business making the company less reliant on retail stores, which had a brutal Q4. The CEO is confident that they can return to 20% annual revenue growth soon.

I would be a buyer under $20 bucks/share and realize it will take some patience but I do think this may be a good long-term buy.