Why This News Means Under Armour May Finally Be Ready to Tackle Nike
Under Armour may have just gotten its best news...ever.
ESPNreported Friday that its sources say Notre Dame will be leaving Adidas to sign on with Under Armour at the conclusion of the school year, which could have wide-ranging impacts across both college athletics and the sports-apparel industry. Notre Dame has been with adidas since 1997.
Source: Flickr/ regan76
Notre Dame is one of the most lauded institutions in the country, and according to Forbes its football team is valued at $117 million, trailing only the University of Texas, which is worth an estimated $139 million.
What it could mean
College athletics have become more popular than ever, and thanks to massive TV contracts, megaconferences, and much more, the industry will likely only continue to grow even more in the future. Yet it isn't just the viewing of the sports that people crave, but also the apparel associated with it.
Consider that the Collegiate Licensing Company reports that in 2012 college licensed merchandise sales topped $4.6 billion in 2012. And Notre Dame finished third on its list of the top-75 universities. Thanks to its increased on-field football success under Brian Kelly, this is well above the ranking of 11th it grabbed in 2010:
Source: Collegiate Licensing Company
Nike was the winner for apparel licensees in this burgeoning market, and apart from 2010 and 2011, it has held onto the top spot since 1999. There is one big clue as to why that is.
Consider the top 10 colleges and who their official apparel provider is:
In fact it wouldn't be until you got to the 16th school on the list -- my alma matter -- the University of South Carolina before you'd find Under Armour's first school.
That is why this speculated contract with Notre Dame is such a huge deal, because for so long Under Armour has only found favor from some of the smaller players in the collegiate world. By signing this contract, Under Armour would be truly stepping onto the main stage of the collegiate athletic apparel industry.
Why it matters
Under Armour currently has schoolwide arrangements with 10 schools: Auburn, Hawaii, Maryland, Texas Tech, Boston College, Utah, Northwestern, St. John's, South Florida and South Carolina. Boston College is the only ACC member that Under Armour currently has -- since Maryland is leaving the conference -- and Northwestern is the only school in the Midwest.
Since Notre Dame itself is located in Indiana and will be joining the ACC for almost every sport beginning this year, this deal will provide even further recognition of the Under Armour brand to those people who aren't even fans of Notre Dame.
Under Armour has watched both its revenue and stock price sky rocket in recent years, as its revenue growth has far surpassed that of Nike:
An agreement with Notre Dame would give Under Armour a huge boost not simply from the sales to fans of the team, but also the countless other people who will now be exposed to the brand on a more regular basis.
While quantifying the exact financial impact of this deal is difficult it is likely that more schools with now begin to consider switching from their current providers like Nike and Adidas to Under Armour. This contract could represent a foundational tipping point for the company and industry as a whole, and investors everywhere should take note.
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The article Why This News Means Under Armour May Finally Be Ready to Tackle Nike originally appeared on Fool.com.
Fool contributor Patrick Morris owns shares of Nike. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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