Puma recently signed projected NBA lottery picks (for you non-sports fans, lottery picks in basketball basically mean the best talent entering the draft) DeAndre Ayton, Marvin Bagley III, Michael Porter Jr., and Zhaire Smith. They also brought in Jay-Z to be their creative director.
Now the obvious questions arises: Could Puma actually be a threat in the sports world?
From a pure eye test, the top dogs of the sports industry (in terms of market share and customer perspective) are Nike and Adidas. Under Armour, the next biggest competitor, is a distant third. Under Armour has secured the majority of sponsorships in the NFL, but they only have one significant player in the NBA (Steph Curry). Although the NFL is the biggest domestic sports league, it is declining in terms of ratings and viewership. Additionally, the NFL, as mentioned, only attracts American consumers. However, the NBA attracts fans from around the world and has grown exponentially over the past five years in terms of viewership and revenue.
This is where Puma comes into play. Under Armour lacks a dominant presence in a growing market, and Puma has the potential to capture four future stars with a brand-expanding character in Jay-Z.
To put into perspective how significant Curry is to Under Armour, in 2016, Curry helped in a 58% surge in Under Armour shoe sales and had officially put Under Armour on the map in the basketball world. Curry has shown no signs of decline, but at age 30, his presence in the basketball world should begin to dwindle away due to a flush of young talent.
If just two of the players Puma signed can turn into stars, then I fully believe that, coupled with the instant branding and marketing brought by Jay-Z, they will take Under Armour's spot as the third biggest player in the sports industry.
From a fiscal view, Puma has a better standing than Under Armour, as well. Puma's first quarter sales rose 21.5% (currency-adjusted at 1.31 billion USD) compared to Under Armour's 4% growth (currency-adjusted at 1.2 USD). More importantly, Puma reported "double digit growth in all regions and product segments" while Under Armour failed to grow in its biggest (in terms of income) region, North America, reporting a 1% loss in this region (currency-adjusted). This indicates that, not only is Puma continuously increasing sales in its most prominent (in terms of where Puma product is bought the most) regions, but they are also gaining traction in Under Armour's prominent region(s) at a fast rate.
What I would do: If you hold Under Armour stock, monitor the play of these four (and future) Puma athletes carefully. It only takes two of these athletes to exponentially propel a brand, so if they appear to rise/be on the come up to stardom, I believe Puma would overtake Under Armour's current position as the third biggest figure in the sports world and I sell the majority, if not all, of any Under Armour stock.
Please read my disclaimer before taking any financial action. This article is fully my research and my opinion(s).