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Why Warren Buffett Might be Rooting for the Ohio Bobcats

Warren Buffett
Warren Buffett
Warren Buffett

When the 13th seeded Ohio Bobcats take on North Carolina tonight in the NCAA Tournament, the team is also playing the underdog role for its apparel sponsor, Russell Athletic.

Twenty five years ago, Russell Athletic was one of the biggest names in sports apparel, along with Champion.

Today, they are a small player in the space, making its name in the value space that fills Walmart and Target stores.

In 2006, Warren Buffett’s Berkshire Hathaway bought Russell Athletic for $600 million. Since then, the company has led a quiet existence. But this year’s NCAA Tournament, has put the brand back in the public eye, thanks to Russell having its best NCAA Tournament ever. Five teams in the 68-team tournament have worn its gear (Colorado St, Mississippi Valley St, Norfolk State, Ohio & Western Kentucky) and its familiar “R” logo has received the most high profile attention in years.

Russell was previously seen as a leader in the workout clothes space, but Under Armour came in and built a premium space in that market that Nike also embraced. The brand lost a lot of momentum.

“Walmart presents sneakers at a lower price point, but they have a very small share of sales because the last thing a kid wants is to show up wearing low-end shoes,” said Matt Powell, an analyst for SportsOneSource, a sports retail tracking firm. “Russell has the same issue.”

Powell says that Russell is now the seventh biggest player in the sports apparel space, owning 3.5 percent of the market. The leader is Nike (25 percent), followed by Under Armour (12.5 percent) and adidas (11.5 percent).

While Russell does sponsor sports teams, it doesn’t spend big money. It’s why the company didn’t try hard to renew its long-standing relationship with Auburn in 2005 when Under Armour came in and bid $10.6 million for a five-year deal with the school. The most high profile athlete the company has signed to endorse the brand is Cleveland Browns quarterback Colt McCoy.

While much is known about the divisions of public companies like Nike and adidas, almost nothing is known of Russell Athletic, which is under Berkshire Hathaway’s Fruit of the Loom division. When the company reports earnings, it doesn’t even break out that division as a line item.

One can assume that Berkshire is one of the world’s biggest buyers of cotton, also owning children’s clothing company Garanimals. That means that even making margins selling in the value stores isn’t an issue and that’s also why Buffett – who doesn’t dump companies he buys very often – hasn’t done anything with Russell.

Buffett could be cheering for Ohio tonight. But it’s not as important to him to win the game as it is for Nike executives to have the Tarheels win. Russell is in the commodity space now, not the branding business.

Questions? Comments? SportsBiz@cnbc.com