On the heels of a third-quarter sales miss and a significantly downward-adjusted full-year outlook, Under Armour today has been shouldering significant criticism regarding its future.
The Baltimore-based brand’s shares had been deep in the red throughout the afternoon and ended the trading day down nearly 22 percent, to $11.53.
Amid intense competition in the athletic space — which has even seen athletic behemoth Nike stumble as momentum intensifies at Adidas and streetwear labels Vans and Supreme — Under Armour has spent the past year struggling to find its cool. Meanwhile, larger macroeconomic factors, a highly promotional retail environment, and a few product misses have also added to the brand’s setbacks.
On an earnings conference call with investors today CEO Kevin Plank got candid on the challenges plaguing the brand he founded.
Watch on FN
Here, four major revelations UA’s chief made about the brand’s struggles.
The Consequences of Aggressive Expansion
Plank suggested that the company’s eyes may have been bigger than its stomach — noting that the company’s present infrastructure is built for a much larger firm.
“Independent of macro challenges in North America, the second side of the intersection are the growing pains that came as a result of such rapid expansion,” Plank told investors. “As detailed on previous calls, we’re well underway with a strategic transformation designed to simplify our go-to-market, correct our inefficiencies and take advantage of the scale and infrastructure we’ve built to better serve our consumers.”
The Footwear Shortfall
“Footwear and women’s is a place where we feel like we can be and do a much better job,” Plank said, noting later in the call that he does see significant potential in the shoe category, which gained 2 percent, to $285 million in Q3 — despite slowing momentum in basketball.
“We’ve got a tremendous opportunity with a franchise like Curry.” Plank also said, admitting that the brand has had some pricing challenges. “I think we probably were a little brag-ish about things like the number of styles that we were selling over $100. And the fact is when you look at some of our key distribution — from our mainline sporting goods — they’re selling footwear at $90. I don’t think we’ve done the best job of being in position with the price-to-value of where we sell and how we sell and identify with that consumer — which goes back to understanding our consumer [and] being consumer-led at the center of everything we do.”
More Than a Logo
“When I look at 2017, I don’t think that we were, frankly, differentiated enough for our consumer,” Plank said, noting that he is looking to marry the price-value equation to a larger goal of product differentiation. “We can’t just stick a logo on and expecting the consumer to buy it because they like the logo. So you won’t see that happen from us.”
Go-Forward Strategy: Reset
“In 2017 and 2018, as we work to reset and strengthen our underlying business, we have three main goals: Operate, fuel and innovate,” Plank explained, reiterating that the company is in the midst of a restructuring. “As we define the issue on our business right now, we see two contributing factors: tough conditions in our largest market and complexities as a result of rapid growth. To address this issue, we must operate a better company. From design, sourcing, process and planning to speed-to-market, consumer connectivity and innovation, we already have multiple strategies in play to right size and amplify the business throughout our portfolio.”
