Insiders say Nike Inc.’s eight-year National Basketball Association (NBA) contract with history-making logo rights could have a marked impact on the athletic footwear market and key competitors such as Adidas AG and Under Armour Inc.
“The agreement specifics were slightly more negative than we expected for other brands — like Under Armour and Adidas — that are trying to build/rebuild in basketball,” wrote UBS Investment Bank analyst Michael Binetti in a note yesterday. “Under Armour has had great success with high profile endorsements lately. But [the deal] likely means that Under Armour’s basketball super star endorsement, Stephen Curry, will be on [television] adorned in Nike logoed apparel starting in ’17.”
While Curry would still be able to sport Under Armour sneakers, Binetti and other analysts suggest the Nike logo on his, and every other basketball super star’s, apparel could tamper with the strength and marketability of their other endorsements.
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Nike has held on to the number one spot in the athletic shoe market for quite some time and experts say the new deal only solidifies the behemoth’s global and domestic dominance, particularly in basketball.
“Nike controls more than 90 percent of the U.S. basketball market and has 75 percent of the players in the leagues — this deal will only solidify that dominance,” said Matt Powell, sports-industry analyst with NPD Group. “Having their logo on the jerseys makes this deal a bargain. The exposure will be immense.”
Citi Research analyst Kate McShane pointed out, in a report yesterday, that Nike already has contracts with stars such as Kobe Bryant, LeBron James, Kevin Durant, Carmelo Anthony, Russell Westbrook and Kyrie Irving.
The combination of “NBA-level sponsorship and player sponsorship,” McShane says, should further secure Nike’s position in the basketball category.
Adidas, the most recent NBA apparel contract holder, announced in March that it would not renew its 11-year contract with the NBA when it expires in 2017.
“We think Adidas’ shift in strategy could put even more share up for grabs for both Nike and Under Armour,” McShane said.
Citi’s Q4 European Survey findings, released yesterday, indicate that Nike remains the top-selling brand in Europe followed by Adidas. However, Adidas has been losing increasing amounts of market share in the market to Nike, the report noted.
Other global growth opportunities for Nike exist within the deal, analysts have said.
“I really expected the deal to go this way as Nike has the infrastructure to handle it and because of their dominance in China, which is the NBA’s second most important market,” said Powell.
Nike’s deal will kick-in for the 2017-18 NBA season. McShane estimated that the NBA partnership could potentially add 3 percent upside to her fiscal 2018 EPS estimates for Nike.
The Beaverton, Ore.-based company is expected to report Q4 on June 25.