NEW YORK — It was once considered a worthy rival to Nike. But right now, Under Armour, founded by a 23-year-old former college athlete, is struggling to “do it.”
Instead, the brand championed on the basketball court by Stephen Curry and on the golf course by Jordan Spieth is now struggling – hard – to find its place in an increasingly competitive sportswear market and cluttered for regular people, where younger shoppers are more curious. -looked at new entrants like Hoka and On running shoes.
Under Armour’s annual sales have been sluggish at best in recent years, while its stock has plunged 88% from its all-time high in 2015. Industry experts have said the company is mired in a nasty mix problems, including an identity crisis. , multiple management controversies, ignoring changing market trends to his detriment, and a spinning carousel of CEOs in rapid succession.
One of them is Kevin Plank, its founder, who returns to the helm for the second time as CEO after being replaced in 2019. Similar to Starbucks founder Howard Schultz’s past returns to Starbucks and the recent return of Disney chief Bob Iger as CEO, Plank aims to right the ship at Under Armour.
“When Under Armor was growing over 20%, people saw it as a legitimate competitor to Nike,” David Swartz, senior equity analyst at research firm Morningstar, said in a CNN interview.
“It was like On or Hoka, but 10 years ago. It was the new sports brand that was making real inroads against Nike, the dominant name in the industry. People saw it as a company that could really break through and take market share from Nike among hardcore athletes,” Swartz said. “Actually, that happened for a while, but it didn’t last.”
Plank launched Under Armor in 1996 to be what its name implies: a layer of protection worn by competitive athletes who sweat in the heat of battle.
The first product was a fitted T-shirt called “The Shorty”, made from moisture-wicking fabric, which elite athletes could wear under their uniforms to keep them dry. Its iconic Under Armor intertwined “U” and “A” logo has been strategically placed on the neckline, to keep it clearly visible.
The T-shirt finally launched the brand to the mainstream after quickly gaining popularity among professional athletes. The startup’s fast track to success led Under Armor to go public in 2005. Its first slogan: “Protect this home.”
In 2010, the company exceeded $1 billion in revenue. Five years later, sales exceeded $4 billion. But then the momentum started to fade.
Prolonged period of pain
The last eight years for Under Armor have been a struggle that shows no signs of letting up.
The company announced a restructuring of its business on Thursday as its North American sales in its most recent quarter fell 10%. Looking ahead, the company issued a gloomy forecast for its current fiscal year, expecting sales to decline 15 to 17 percent. The layoffs will be part of efforts to right the ship, but executives have not said how many employees will lose their jobs.
Under Armor also announced a $500 million stock buyback, a move aimed at rewarding shareholders.
Plank told analysts on Thursday’s earnings conference call that he would lead a business reset focused on selling fewer but more innovative products to meet the needs of athletes, significantly accelerating product development, by refocusing on its men’s clothing category and reducing discounts on its products. some products.
“We are simply doing too many things. There are too many products, too many initiatives. To rebuild this brand, we have to be very focused and prioritize what needs to be done so that our teams know exactly what to do with a clear definition of what needs to be done. success for them,” Plank said.
It shouldn’t be ignored that management problems have also plagued the company for years, Swartz said.
“The company has had essentially five CEOs in the last five years, if you count Kevin Plank twice,” Swartz said. Plank was announced as CEO – again – in March, ending Stephanie Linnartz’s very brief one-year tenure.
Plank admitted on Thursday’s conference call with analysts that frequent top management turnover has become a serious obstacle to success.
“With several CEOs and heads of product and marketing in North America over the past five years, the continued turnover of critical leaders has been at the heart of our inability to remain agile and decisive,” he said.
Series of controversies
It was starting in 2016 that “things really started to fall apart” at Under Armour, Swartz said. A huge problem arose when a major distribution channel for the brand went bankrupt and closed its stores.
The bulk of Under Armor’s products are sold through sporting goods retailers and department stores, including Macy’s and Kohl’s, as well as online.
“When Sports Authority went bankrupt in 2016, it really hurt Under Armor. It was a major customer of the brand, as was Dick’s Sporting Goods,” Schwartz said.
In 2020, UCLA sued Under Armor for terminating a $280 million sponsorship deal. The suit alleged that Under Armor was in trouble before Covid-19 and was using the pandemic as a reason to pull out of the deal.
The 15-year sponsorship deal, signed in 2016, was at the time the largest in college sports history. In exchange for the $280 million, UCLA student-athletes and staff would exclusively wear and use products provided by Under Armor (UA). The company reached an agreement with UCLA.
The following year, Under Armor paid $9 million to settle a multi-year investigation with the U.S. Securities and Exchange Commission over its past accounting practices, according to Footwear News.
Aside from more bad press for Plank, competitors were gaining ground on Under Armour, whose high-performance sportswear offerings were not best suited to the Lululemon-driven athleisure trend that had emerged and dominated the fashion what consumers were dressing for during the pandemic.
“Under Armor has failed to hang on to the streetwear or sporty style that catapulted On, Hoka or Merrell,” said Zak Stambor, senior analyst, retail and e-commerce, with the research firm eMarketer, in an interview with CNN. “It needs to figure out what’s next. If it can’t, then it needs to quickly latch onto what another brand has identified as the next big thing.”
Stambor questioned Plank’s decision to forgo discounts in an era when consumers are hyper-focused on value.
“It carries the risk of a drop in demand, especially when you don’t have a must-have product,” he said. Stambor said the move also stands in stark contrast to rival Adidas’ recent move to roll out cheaper versions of its must-have shoes.
Despite the significant challenges, Stambor said Under Armor can remain relevant in the market. “It’s a very big company with huge revenues. It’s not like the brand has completely lost its status. It’s a bit stuck,” he said.
“Under Armor needs to identify what consumers want and move strongly in that direction. The company has not fully demonstrated its ability to do this in recent years,” he said.
One area that’s growing is long-term brand partnerships with celebrities, said Eric Smallwood, president of Apex Marketing Group, a sports and entertainment company that evaluates sponsorships and advertising campaigns.
“Under Armour’s relationship with ‘The Rock,’ Dwayne Johnson, has been pretty successful. They’ve expanded into the United Football League, which is the soccer league that Johnson is a co-owner of,” Smallwood said. “Their uniforms are Under Armour.”
Golf is another area where the brand is making inroads, while the partnership with Stephen Curry has kept the brand visible in the basketball world, Smallwood said.
Basketball superstar Curry, arguably the best shooter in history, signed with Under Armor instead of Nike in 2013. Meanwhile, the NBA brand’s other big star, Joel Embiid, left Under Armor in 2023 a few months after being named the league’s best shooter. valuable player.
Embiid signed a shoe deal with Skechers last month. Under Armor is reportedly bidding heavily for a shoe deal with WNBA phenom Caitlin Clark, who many expect will sign with Nike.
“The main thing for Under Armor is that the brand is clear about its identity,” he said. “Is it a shoe company? Is it a clothing company? At some point, everyone copied their moisture-wicking undershirt. Then, maybe that they have had an identity crisis. It will be a matter of deciding whether they want to evolve into a lifestyle brand or stay in performance-based products.
News Source : www.ksl.com
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