Takeaway: Kevin Durant leaving Nike for UnderArmour is a lot for UA to handle. It validates our endorsement note from last night.


Thursday (8/7)

TUMI - Earnings Call: 8:30am

HSNI - Earnings Call: 9:00am

ADS - Earnings Call: 9:00am


UA, NKE  - NBA star Kevin Durant bails on Nike as Under Armour prepares huge offer


  • "The NBA's Most Valuable Player was supposed to be at Nike Inc.'s Oregon headquarters today. He didn't make the trip. That could be good news for Under Armour Inc., which reportedly is set to offer Oklahoma City forward Kevin Durant a lucrative endorsement deal. Durant's contract with Nike expired last week and he abruptly canceled a scheduled visit to Nike."
  • "Michael McBride, Under Armour's senior manager of sports marketing, today tweeted: 'Wish I could tell everyone what is going on today.' The tweet included a photo of some Under Armour-branded bottled water on a basketball court and a note pad that appeared to be set up for a presentation. It also included four hashtags: '#Future #GoodPeople #Recruiting #Partnerships.'"
  • "That tweet could be referring to anything. But it comes as the New York Daily News reports Baltimore-based Under Armour is ready to pay Durant up to $30 million a year for an endorsement deal. Durant's Nike contract paid him $60 million over seven years."

Retail Callouts (8/6): UA, NKE, FDO, DG, DLTR, URBN, JCP, TGT - chart1 8 6

Takeaway: We'll play along with the conspiracy theory on this one as it pairs nicely with the note we published last night looking at endorsement obligations for both NKE and UA (Link - CLICK HERE). If the KD deal closes with UA at the reported $30mil per, the company would have to generate an incremental ~$275mm in sales to make that margin accretive. Not outside of the realm of possibility, but consider two things. 1) In 2013 the KD grossed $175mm, 2nd only to the Lebron at $300mm. 2) That $275mm is a 75% premium to what UA has done in all of footwear over the past 12mnths. At NKE that's just 1.1%. It may be a brand builder for the company, but without a Nike-esque product and marketing engine behind KD, it's tough to see this benefiting margins in the short term.

FDO, DG, DLTR - Dollar General Said to Explore Family Dollar Bid


  • "Dollar General Corp. is weighing a bid for Family Dollar Stores Inc. that would challenge Dollar Tree Inc.’s $8.5 billion takeover of the discount retailer, people with knowledge of the matter said."

Takeaway: We could argue that a combined FDO/DG may generate more cost efficiencies on the product side due to the overlap in merchandise, and subsequent buying power with vendors. In addition, the real estate profile is more complementary for DG/FDO than many might initially think. That said, the reason the real estate is complementary is that DG has -- for the most part -- very good locations, while FDO's leaves much to be desired. We'd have to argue that synergies would be considerably better here than with DLTR in order to justify paying more than the 11x EBITDA that's already in play.

URBN - Unveils Android App

Retail Callouts (8/6): UA, NKE, FDO, DG, DLTR, URBN, JCP, TGT - chart2 8 5

Takeaway: Interesting that this only available now with dot.com such a big part of URBN's business accounting for about 26% of net sales. We hear so much about the importance of mobile, but put into context we think we can explain why this was so low on the priority list. Dot.com represents about 6% of total retail sales. Mobile and tablets account for almost 20% of that (or 1.1% of total retail sales). 80% of that comes from Apple devices, and only 20% from Android (.2% of total retail sales).


JCP - J.C. Penney opens its first-ever store in Brooklyn on Aug. 29


  • "J.C. Penney Company will open its first-ever store in Brooklyn, further increasing its New York City footprint, on Aug. 29. The all-new 124,000-sq.-ft., single-level store, located in Gateway Center, will provide a look at Penney's updated store model, which includes a new footwear format, an increased focus on jewelry, and new energy efficiency standards."

UA - Former president of ESPN joins Under Armour board


  • "Under Armour announced that George W. Bodenheimer, former president of sports network and entertainment company ESPN has joined the company's board of directors."
  • "Bodenheimer is an ESPN and cable industry pioneer, having served as the company's longest-tenured President from 1998 to 2012, during which time he led an unprecedented period of global growth."

TGT - Target Opens Tech Outpost In Sunnyvale


  • "Target has opened a small tech hub in Sunnyvale, not far from a major tech outpost of its archrival, Wal-Mart."
  • "Target’s new office will consist of 15 to 20 workers for now, with the possibility of expanding to as many as 70, a company spokesman told the Star-Tribune. The hub’s focus will be on online and mobile data analytics and engineering, and will be separate from Target’s Technology Innovation Center, which opened in San Francisco last year."

GNC - GNC Holdings, Inc. Names Michael G. Archbold CEO


  • "GNC Holdings, Inc., a leading global specialty retailer of health and wellness products, today announced that its Board of Directors has appointed senior retail industry executive Michael G. Archbold, 53, as Chief Executive Officer and member of the Board, effective immediately. The Board also announced that Joseph Fortunato, Chairman, President and Chief Executive Officer, is leaving the Company and has stepped down from the GNC Board. Lead Independent Director, Michael Hines, has been elected Non-Executive Chairman of the GNC Board."