Under Armour may be giving up a contract to outfit all Major League Baseball players to Nike, according to a report Thursday in Sports Business Daily.
The report, citing an anonymous source, said Nike and Major League Baseball were close to inking a deal to have the Under Armour archrival take the contract for on-field apparel rights set to start in 2020.
That would end a 10-year uniform partnership between Under Armour and MLB before it even began.
The Baltimore-based brand announced the deal with MLB in December 2016 during baseball’s winter meetings, calling its first uniform agreement with an American professional sports league a “massive statement.” At the time, MLB Commissioner Rob Manfred said team owners were attracted to Under Armour because of its appeal among youths.
But the company’s fortunes have changed since then. Sales growth has slowed amid store closings by key retailers, intense competition and changing demand for athletic apparel, which has been especially weak in Under Armour’s biggest market in the United States.
Sports Business Daily attributed the switch to Under Armour’s recent financial difficulties, saying the comany backed out of the deal to reduce overhead and save about $50 million.
Under Armour officials declined to comment Thursday afternoon.
“Per company policy, Under Armour does not comment on speculation or rumors,” a spokeswoman said.
A spokesman for Major League Baseball also declined to comment.
But retail and marketing experts said they would not be surprised if a pullback from the uniform deal turns out to be one way the company makes good on its promise to be leaner and more efficient rather than growing at all costs.
The athletic apparel and footwear maker has been taking steps to reverse a slide in sales and stock price that started toward the end of 2016. It announced a restructuring plan in Februrary and plans to simplify operations by reducing the variety of products its sells.
“Under Armour has been very successful and strategic with grass roots marketing, using professional athletes and effectively going up against a Goliath like Nike, where Nike has had the ability to do these large licensing deal with professional teams,” said T.J. Brightman, president of A. Bright Idea, a public relations and marketing firm with offices in Bel Air and California. “When the announcement was made to align with Major League Baseball, that was quite a splash and a sign to many that Under Armour was stepping up in a major way to go after Nike, Reebok and other larger footwear and apparel brands.”
The possible end of the deal “Is just a sign of the times wirh respect to Under Armour’s situation and keeping the stockholders happy,” he said.
The company’s stock surged 2.5 percent in Thursday trading to close at $20.58 a share, its highest level since last July.
Industry analysts have said such licensing agreements can generate hundreds of millions of dollars per year if extended for the long term. Under Armour had agreed to supply game-day outerwear, base layer undershirts and year-round training apparel.
But It may have turned out that outfitting MLB teams, essentially a form of brand marketing, is not cost-effective given Under Armour’s current financial woes, said Jason Moser, an analyst with the Motley Fool's Million Dollar Portfolio. The deal was reached at a time when the company had lofty goals of reaching upward of $7.5 billion in annual sales by now, he said,
“It was certainly a different story back then,” he said.
Either way, Moser said, the MLB deal likely would have little material impact on the company.
“If they went through with the deal, I don’t think it would make much of a difference on the upside, and if they don’t, I dont’ think it would make much of a difference on the downside,” he said. “It won’t make or break the brand.”
Under Armour now makes some cleats, compression sleeves and batting gloves used by MLB players and some of the catchers’ gear.
In the Under Armour deal, sports merchandise retailer Fanatics was granted licensing rights to make and sell fan gear. Fanatics still is expected to distribute jerseys and other gear for fans at retail, Sports Business Daily reported.
On Wednesday, Fanatics inked another deal, as the National Football Leage announced a product licensing deal allowing the retailor to make NFL fan jerseys.