UNDER ARMOUR in BRAZIL UNDER ARMOUR in BRAZIL Specialty Stores Specialty Stores

in Rio de Janeiro and Sao Paulo in Rio de Janeiro and Sao Paulo

Dominick FuccilloDominick FuccilloScott GlasthalScott GlasthalGuive SavojiGuive SavojiIvan VelevIvan Velev

UNDER ARMOUR in BRAZIL UNDER ARMOUR in BRAZIL Specialty Stores Specialty Stores

in Rio de Janeiro and Sao Paulo in Rio de Janeiro and Sao Paulo

Dominick FuccilloDominick FuccilloScott GlasthalScott GlasthalGuive SavojiGuive SavojiIvan VelevIvan Velev

International Business OpportunitiesInternational Business Opportunities"Under Armour's international expansion is a key component of our long-term growth strategy for the brand,“ Ryan Wood, President of Under Armour Europe - July 2006

2009 - 5.6% of sales outside of USA / Canada- Primarily in Europe / Japan- Third-Party Manufactured from Southeast Asia and South America

Source: Under Amour Press release 2006, 2009 Under Armour Annual Report

Why Brazil?Why Brazil?•Brazilian economy has rebounded from the global recession and projects 5.5% GDP growth in 2010 with currency stability and a strong, inflation targeting central bank.

•World Cup in 2014 and the Summer Olympics in Rio de Janeiro in 2016, a high-upside international marketing opportunity for global brand exposure.

Source: The IMF

Brazil Entry ProposalBrazil Entry Proposal

Source: Under Amour Press release 2006, 2009 Under Armour Annual Report

•Proposal –Projected Cost $25 million USD in 2011, $73 million USD in 2014, $88 million USD in 2016

Establish two Under Armour retail stores in Sao Paulo and Rio de Janeiro.

Create a South American Headquarters in Rio de Janeiro and central distribution center for all South American product distribution and potential third-party retail sales.

Implement marketing strategy targeting current and up and coming Brazilian athletes, specifically focused on the soccer market and creating brand awareness and status among high end Brazilian consumers.

Targeted ramp-up of investment to coincide with World Cup and Olympic events.

Brazilian Apparel/Footwear MarketBrazilian Apparel/Footwear Market

Competitor Pricing StrategyCompetitor Pricing StrategyNike Adidas Under Armor

Shirt $ 25 $ 30 $30

Cleats $ 150 $ 195 $100

Nike Adidas Under ArmorShirt R$ 44 R$ 53 R$ 53

Cleats R$ 264 R$ 343 R$ 176

Nike Adidas Under ArmorShirt R$ 110 R$ 80 TBD

Cleats R$ 400 R$ 650 TBD

Nike Adidas Under ArmorShirt 2.5x 1.5x TBD

Cleats 1.5x 1.9x

Price in the US (in US Dollars)

Price in the US (in Brazilian Real)

Price in Brazil (in Brazilian Real)

Brazil price / US price in Brazilian Real markup

Source: esporte.netshoes.com, www.adidas.com, www.nike.com

Tariff and LegalTariff and Legal• Common External tariff is 35% on clothing

and athletic shoe• China anti dumping law will not be

applicable to premium shoes• Foreign companies treated the same as

Brazilian companies• Paperwork chains

Source: The International Custom Journal: Brazil #6, 20th edition, 2008, Doing Business: Measuring Business Regulations. www.doingbusiness.org

Political Economic Stability Political Economic Stability • Socialism fears in 2002 of the first working class president

were proven wrong by a balanced government actions that increased minimum wages, kept inflation low, and is working to facilitate more foreign direct investment

• 2010 elections are expected to elect a leader that will continue this trend

• President Obama called Lula “the most popular politician on earth”

Source: The Most Popular Politician on Earth. Margolis, Mac. Newsweek. September 22, 2009. http://www.newsweek.com/id/215941

Currency Instability Currency Instability

Source: The IMF and recent Capital Account Crises, Evaluation Reports, 2003, www.ieo-imf.org

• Capital account Crisis in 1999

Brazil’s Unholy Trilemma – Pre 1999Free capital flow

Sovereign Monetary PolicyFixed exchange rate

East Asian Financial Crisis

Brazil’s Unholy Trilemma – 1999

Currency Stability Currency Stability

1.0x

1.4x

1.8x

2.2x

2.6x

3.0x

4/26/2006 4/26/2007 4/26/2008 4/26/2009 4/26/2010

Average: 2.65x

Min: 1.56x

Max: 2.65x

Brazil currently has a slight current account deficit that is dwarfed by the US’s. This would suggest further appreciation of the Brazilian Real.

Source: www.oanda.com via Interbank exchange rates

Exchange Rate Risk Exchange Rate Risk

$187 Million just sitting on the balance $187 Million just sitting on the balance sheet and its time to make a movesheet and its time to make a move

Questions? Questions? We must protect this house!We must protect this house!