In a sportswear market dominated by Nike and adidas, Under Armour has encountered radically slowing revenue growth and a consumer landscape in which it has fallen out of step.
A new article in the New York Times looks at the 24-year-old company, tracking what happened between its high water mark of 2015 – 26 consecutive quarters of 20% or greater year-on-year revenue growth, taking it ahead of adidas to the number two spot in the US sports market – to a slump in revenue growth last year and its share price plummeting by more than half its 2015 price.
Some of these problems predate Wall Street Journal’s November 2019 discovery that Under Armour was under investigation for fraudulent accounting, which has thrown doubt over the company’s reporting. But in other areas, the problems run deeper.
From early on, the company has always maintained a focus on technical, high-performance sportswear. As a result, Under Armour was able to extend into high-end sponsorship agreements in some of the US’s biggest sports: among the athletes sporting the brand were the NFL quarterback Tom Brady, heavyweight world champion boxer Anthony Joshua, and probably the most important for the company, Golden State Warriors’ sharp-shooter Stephen Curry.
It would be with Curry’s name that the brand would demonstrate an inability to adapt to the new reality of sports brands: the convergence of sport and fashion.
The company poached from its rivals, bringing in footwear talent that had engineered successes at Nike, such as Aaron Miller, who spoke to the Times having worked for Under Armour between 2013 and 2015.
Following the sell-out success of the first Curry signature basketball sneaker, Miller’s intention was to double production, still expecting to sell out; executives, meanwhile, overruled the Nike veteran of 18 years and produced three times what he recommended. The product drop became a glut, and when shoes didn’t sell out they ended up on sale racks, severely damaging the brand.
So what happened? According to insiders, it’s not the first Under Armour decision to be made based on instinct rather than checked against the market.
Look to the purchases. Over an acquisitive stint between 2013 and 2015, Under Armour acquired four companies for a total of around $700 million.
The plan was, effectively, to do a Nike Plus: using connected technologies to gather data, the company could provide a service to athletes and start designing better products.
Even in 2017, as the Motley Fool pointed out, smart fitness was a tough business to get into, and unlikely to solve the problems created by the brand’s reliance on performance in an increasingly fashion-driven market. Later that year, as if to confirm the doubters, the company killed off its connected device range.
Investors’ eyebrows remain cocked as the company’s comms strategy pulsates and perspires a more hardcore idea of what sells sports brands than the high-fashion advertising more typical of Nike and adidas, whose associations are often as musical as they are sporting.
As Euromonitor has observed, however, the issues run deeper. Under Armour remains reliant on wholesale and the US is its largest market. So what to do? The likelihood is that the company will ramp up its direct-to-consumer strategy and expansion outside of the US.
Last week, the company unveiled its new campaign, per CNBC reporting from the NRF’s Big Show. The slogan: “The Only Way Is Through.”
Sourced from the New York Times, WSJ, Motley Fool, Mobihealth News, WARC, CNBC
