Under Armour (NYSE:UA) can be a potential threat to Nike (NYSE:NKE) and Adidas

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By Thomas Copeland on September 9, 2014 Market

Kevin Durant has become the next best thing for endorsements as companies like Under Armour (NYSE:UA) and Nike (NYSE:NKE) battle over him to represent their athletic shoes range. But Nike (NYSE:NKE) managed to win the battle by offering him a higher deal amounting to $350M. According to Under Armour (NYSE:UA)’s Chief Executive Kevin Plank the company doesn’t mind going up against Nike (NYSE:NKE); he further said that Under Armour (NYSE:UA) isn’t discouraged at all from bidding on more endorsements of top sportsmen.

Under Armour (NYSE:UA)’s deal offering to Oklahoma’s basketball player made an intentional statement to those involved in the sports world: athletes, athletic directors, presidents of team clubs or a league commissioners, that the company’s heading towards groundbreaking benchmarks in the sportswear market.

Their CEO emphasized that there isn’t a deal that they can’t match or outdo.

Plank made public his delight that Nike (NYSE:NKE) was willing to pay $150 million more to Durant, as his seven year term with Nike (NYSE:NKE) was ending; it was done to keep him from taking UA’s (NYSE:UA) offer of $200 million.

Nike (NYSE:NKE) despite being the world’s largest sports goods manufacturer (making ten times more than UA (NYSE:UA)) is known to pay lower than its competitors for endorsements as the company never had been challenged before. Under Armour (NYSE:UA) took on Nike’s (NYSE:NKE) deal by being prepared to spend a large sum on marketing. Due to their vigorous sales revenue and profits UA (NYSE:UA) has the capacity to persuade any athlete, team or league with a hefty contract amount.

If Nike (NYSE:NKE) ups every contract Under Armour (NYSE:UA) tries to pursue they will have less cash for other leagues or personalities, which will create opportunities for the Baltimore based company to take on good deals. Under Armour (NYSE:UA) has been generating revenue three times more than Nike (NYSE:NKE)’s rate. Company’s stock gained 89% annually (Aug 13 – Aug 14) compared to Nike’s (NYSE:NKE) gain of a mere 26% in the last twelve months.

One of Under Armour (NYSE:UA)’s major achievement was securing second position in the US for sportswear and accessories (athletic) market, replacing a top brand like Adidas (OTCMKTS:ADDYY) who moved to third position; its sales have declined 23% as compared to last year, resulting in a revenue of $1.1 billion only. Whereas Under Armour (NYSE:UA)’s sales have risen by 20% in the same time period, bringing in a revenue of $1.2 billion. However both companies are still behind Nike (NYSE:NKE)’s sales worth of $8.9 billion in the same time period.

Under Armour (NYSE:UA) is taking major steps in athletic footwear, in particular for women and training as opposed to basketball. They recently named Brazilian supermodel, Gisele Bundchen as their brand face to promote their products and create an appeal among their female targets. The company is working hard to become a key figure in the sportswear industry and is introducing new strategies to achieve set targets in order to get worldwide recognition and become the largest existing athletic brand.