There has been a ton of breathless analysis about the impact of Kevin Durant’s move from the Oklahoma City Thunder to the Golden State Warriors and that move’s impact on the sneaker business. The conclusions have ranged from vast conspiracy theories about the invisible hand of Nike, to the imminent demise of Under Armour (UA), and just about everything in between.
First, let’s put Durant’s sneaker influence into perspective. Durant represents a tiny portion of Nike’s annual sales, or less than 1 percent. This means that even a major change in Durant’s sales will have a negligible impact on Nike’s total results. At UA, it is not footwear but apparel that is by far the largest part of their total business. Basketball is only a portion of UA’s smaller footwear business. Curry is a larger part of the total UA business than Durant is of Nike, but not a critical part by any means.
In terms of Nike’s involvement, I’m sure they are pleased that Durant is in a larger market than Oklahoma City but, at the end of the day, the Bay Area is a minor player in the U.S. basketball market. The epicenter of basketball in the U.S. remains the I95 corridor, with New York City at the heart. Los Angeles and Chicago are also big players in basketball sales. So, while Nike may be pleased for Durant to get out of OKC, I’ll bet they would have preferred LA or Boston.
I’m also sure that Nike is pleased that Durant has a better shot at the NBA championship now. Brands need their athletes to perform at a high level on national media to give their brand authenticity and credibility. However, winning championships does not guarantee an increase in shoe sales. Shoe purchases do not respond in the same way that jerseys and championship gear do. Tying into this, I do anticipate that Durant’s move will reap some benefit for adidas in their last year of the NBA jersey sponsorship.
When a marquee player moves from a small market to a large one, sales typically jump. For instance, we saw this when Carmelo Anthony moved from the Denver Nuggets to the New York Knicks. But I fear the headwinds in performance basketball cited by many brands and retailers will have a dampening impact on any upside for Durant. I believe the marquee basketball trend is now over and will not generate much growth over the next few years, regardless of where players play.
Nike has ceded some market share to UA in marquee basketball, but Nike’s #1 position is not under threat. Some have tried to claim that Curry will outsell LeBron this year, but that is merely bad analysis of flawed data. Still, UA is clearly taking share in what is now a shrinking market.
It is also important to remember that Nike, Inc. has more than 75 percent of the NBA players under contract. This supremacy alone guarantees a large share of the market.
While Durant’s move to the Warriors will have a profound bearing on what happens on the court, I do not anticipate a major impact to neither Nike’s nor UA’s businesses with this move.