Since Under Armour announced its new distribution deal with Kohl’s Corp., during its Q2 conference call on July 26, the new partnership has been top of mind for analysts and investors.
The deal, which would put the Baltimore-based athletic brand in 1,100 Kohl’s stores globally starting in 2017, has been met with both excitement and confusion. Since it would mark UA’s entrance into the mid-tier channel, some have questioned the impact on the brand’s carefully crafted premium positioning.
UA chairman and CEO Kevin Plank had moved quickly to keep concerns at bay, telling shareholders during the Q2 conference call that not only would the partnership help the company tap the notoriously evasive female market but that the brand would continue to sell “elevated product” at Kohl’s.
“We think Kohl’s is a great evolution for us — we think that the female consumer is there, she’s shopping and she’s buying … this is a consumer decision, not really a channel decision,” Plank said. “We believe that there’s a massive opportunity with the consumer that’s walking into those stores and looking for the Under Armour brand and, frankly, they haven’t been able to find it.”
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During a meeting with Carrie Gillard, director of investor relations at Under Armour, Citi Research analyst Kate McShane unearthed several new details on the relationship that may also quell some investor concerns.
“UA confirmed that Kohl’s would primarily represent the ‘good’ assortment within a good/better/best strategy, including lower price point items (basic tanks, leggings, shirts) in exclusive colors/materials versus the premium department store or authentic sporting goods channels,” McShane wrote Tuesday, noting that the brand plans to revive popular legacy innovations exclusively at Kohl’s.
“We believe it has always been management’s intention to expand the brand outside of the premium channel, not unlike what Nike has achieved with distribution ranging from outlet to mid-tier and premium channels,” McShane added.
Still, McShane explained, the new distribution would require that UA expand its assortment and increase its emphasis on price-point planning.
UA’s growing footwear business should help foster its segmentation goals, she added.
