Market Overview

Under Armour Is Looking To Cross Over Nike

Under Armour Is Looking To Cross Over Nike

Under Armour (NYSE: UA) is far from conservative. It's an aggressive and confident company that desperately desires to steal market share from Nike (NYSE: NKE).

This is especially the case lately in the basketball sneaker market, which Nike has dominated for decades. The Jordan brand has proven to withstand the test of time, and Nike still owns 95 percent of the market. Under Armour owns just 1 percent of this market, but a recent development might change that.

Most Valuable Player(s)

Under Armour is offering a 10-year, $250-million deal to Kevin Durant. This is a huge investment, especially since Nike "only" sold $95 million in Durant shoes last year. For Under Armour, it's not all about the profits at this stage in the game; it's about increasing brand recognition.

Related Link: 5 Biggest Athlete Endorsement Deals Ever

It's clear that Under Armour is aware of basketball's popularity right now, and the company looking to set itself up for the long haul. It signed Stephen Curry last year. If it can land Durant, it might have a shot at significantly increasing its market share.

There is one reason why and it might be a bit overlooked.

Success on the hardwood plays a huge role in sneaker sales. LeBron James is going back to Cleveland. The NBA Champion San Antonio Spurs are another year older. This leaves the door open for Durant and the Oklahoma City Thunder. If Durant manages to lead his team to an NBA title, there's little doubt his shoes would fly off the shelves. It's possible that Under Armour recognized this angle.

It's a guarantee that Under Armour feels good offering this money because of Durant's character. He's not the type of guy who finds himself in bad situations, and his MVP speech last season revealed his strong and likeable personality.

There's one potential warning sign, whoever. Nike hasn't invested in basketball sneakers at the same rate as in the past. This could mean the company's return on invested capital in this market has declined.

Could it be due to declining excitement for the Jordan brand, or is it something related to the industry? If it's the former, then Under Armour will have an opportunity to come in and bring something fresh, new and exciting to the market.

Under Armour is up 60 percent year to date; Nike is up about 1 percent.


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