Under Armour Dominance Has Come To An End – Business Insider| 4 Things To Fix It

Under Armour’s status as the golden child of athletic retail might be ending.

Source: Under Armour shares fall on earnings – Business Insider

Take a moment to do a simple search on Under Armour on this site and you something you won’t see on any other sneaker sites: A bevy of analysis on the UA brand with data and projections. This article on Business Insider claims that UA’s dominance is coming to an end… but when was UA dominant?

UA earns 5 billion a year. They’ve seen 20% growth every year until this last year disrupted their growth, but not really. As a comparison Nike earns 32 Billion a year and adidas 16 Billion. Even when Under Armour was the top selling brand behind Nike in the US market, adidas still earned more money, but because the growth of the company was annually 20%, the stock market was in love with the brand.

The problem is the moment a company decides to change the projection for the company and think long term growth over immediate returns shareholders get nervous. That’s what has happened to Under Armour. In October at the 3rd Quarter report, CEO Kevin Plank stated the company would spend more to grow (a natural progression in business) and the market went nuts. The company stock tanked and anyone reading this site or about UA knows the rest of the story. Today during the Q4 2016 report, UA didn’t hit their mark and predictably the market overreacts and the $UA (Class C) stock tanks and along with the more important $UAA (Class A) stock is following suit.

The problem is the company still grew; so why the panic? Is it reasonable or logical? No.

4 Reasons Under Armour is a Buy, not a hold or sale.

Under Armour has a relatively easy fix in house: Repair footwear and Grassroots Marketing. How to do this?

1. They have a new technology in Threadborne. They have yet to transition threadborne into their running footwear. They have focused their next running shoe campaign around digital. Running/performance footwear is down, so the running segment should really be considered fashion and a more attractive silhouette should be the focus and it should feature tech. Branding should be moved to the tongue of the shoe and heel counter keeping the profile clean. Think performance but create fashion.
2. They have yet to generate any casual footwear that they’ve focused on to counter the gigantic move to retro. They have yet to understand the pricing behind the most successful footwear around in the last couple of years, the adidas Superstar. The Superstar is a 80-100 dollar shoe. What am I saying here? The brand is focusing too much on grand schemes and in doing so they are ignoring the simple fix in front of them. Correcting footwear sales is a matter of giving the people a simplified casual shoe at the correct pricepoint with minimal branding styled after a retro look utilizing modern tech. They have under the UAS brand a shoe that could perform well, but it is priced outside of the market for competing with Chuck Taylor, Superstar, Stan Smith, and Air Force 1. The 60-100 dollar price range is golden and a solid casual shoe that they already have should be rebranded and priced accordingly. That shoe is the UAS Club Low currently priced at 140.00. Get this shoe to 90-100 and it works. Then use NBA players and UA endorsers in the campaigns.

   

3. Immediately incorporate UAS sportswear into the catalog and remove the premium price. The line looks amazing, but keeping it as a niche market item isn’t smart. It is actually against what UA has always been. UA should take a page from Nike. They need to edit to amplify. They can call it something else of course like, “get rid of the load of shitty shoes and focus on the solid performers.”
4. In Q3 the big stock price drop was associated with the increase in marketing spend. Spend the damn money. The Curry 3 has only had one promotional item attached to it since it released in September. 1. The purchase of digital companies over an emphasis on marketing has been a big mistake. Under Armour needs a solid grassroots program for marketing that utilizes social and its website. An increase in DTC was shown in 2016, but it could be much better with a more active YouTube channel and campaigns that are more visible. Support retail outlets with merchandising materials and take the time to make the product more beautiful.

Under Armour can hit that 7.5 Billion Plank is aiming for, but it won’t if it continues to operate like a BIG company. Like Plank said in his conference call this morning, the company needs to get back to “simple”.