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Few people likely noticed that Li-Ning – the largest Chinese athletic footwear brand – announced a partnership this morning with Skins, an Australian-based sports compression apparel brand. Formerly footwear-only, a few weeks ago Li-Ning dove into swimming…now compression. Watch this one, folks. Consider the following:

  • If opening a flagship store in Portland, Oregon earlier this year didn’t catch the attention of domestic athletic footwear companies, this move will. The partnership of a leading compression company by arguably China’s most vaulted footwear brand puts it squarely in the crosshairs of Nike and Under Armour.
  • A brief look at the company’s site (check it out here) reveals its heritage in cycling, however, the product has since transformed into multisport use. Most similar to Under Armour’s Recharge compression suit, both in price and function (think $75+), Skins doesn’t currently offer a compression product for the masses that competes at the $25-$50 level that both Nike and Under Armour offer – yet. See the examples below.
  • Recall that this also follows a move by Li-Ning on August 31st to get into the swim apparel market by becoming the official USA Olympic Diving Team’s apparel sponsor through 2012. In addition to the company's first U.S. sponsorship, it's a major indication of the brands intentions of becoming an apparel brand as well.
  • Skins’ most direct global competitor is Under Armour. With less than 5% of UA’s revenues (~$50mm) generated from outside North America, which is almost entirely derived from Japan, the company has taken a measured approach expanding into the Far East thus far. As a point of reference, the company has been in Japan for more than 10-years now and the business is now just approaching $100mm in sales at retail.  
  • On the other hand, Li-Ning’s distribution spans over 7,500 stores across China and is unquestionably one of the key benefits to the partnership for Skins with immediate access to the Chinese market.

What does this all mean? Under Armour and Nike will have to be more aggressive about their respective growth plans in China – period. Back on the Q1 earnings call CEO Plank noted that, “We are also taking initial steps into China, currently working to understand the consumer and how we need to organize to insure success.” While there’s plenty of share to be had in China, with Li-Ning making a bigger push in its local market with a better asset, we wouldn’t be surprised to see UA to step up its SG&A in a defensive way to protect its existing strat plan.  


UA/NKE: Li-Ning Has More Skin in the Game - Skins 9 13 10

Casey Flavin