Foot Wars: Why Under Armour’s Shoes Are Selling at Higher Prices
Did Under Armour Beat 1Q16 Earnings Expectations?
Under Armour’s premium focus
Under Armour (UA) has increasingly looked to “premiumize” its product line. For example, its signature Curry Two footwear model retailed $10 higher than the Curry One and still experienced very strong sell-through, partly due to Curry’s own performance on the court and popularity. The company also plans to launch the Curry 2.5 next month through wholesale partner Foot Locker (FL) and its own e-commerce site. The shoe is expected to be priced at $135, $5 higher than the Curry Two.
Innovation agenda
Under Armour is also banking on innovation to raise its selling prices. As discussed in the last article in this series, UA’s Architect, which uses 3D printing technology, retailed at $300 and was sold out in 19 minutes. Peers Nike (NKE) and Adidas (ADDYY) have also come up with footwear using variants of this technology, which is expected to provide greater customization options to customers and increase average selling prices, or ASPs. Nike also launched a slew of innovations in footwear last month, including a footwear product that uses sport-informed adaptive lacing, which adjusts the footwear according to the requirements of the game.
Market share, ASP gains
According to CEO Kevin Plank, UA is gaining market share in footwear. He stated, “On a global basis, our Footwear ASPs grew in the high single-digits in the first quarter, and we expect them to continue to grow throughout the year, including in our largest Footwear category, running.”
In contrast, rival Nike reported a 6% contribution toward footwear revenue growth from higher ASPs in the first nine months of the current fiscal year. Skechers (SKX) reported a 6% increase in ASP per pair of shoes in its domestic wholesale segment in 2015.
Distribution upside
Under Armour’s expansion in its direct-to-consumer (XRT) and wholesale channels are also likely to provide premiumization opportunities. Building its own retail network and expansion in the number of e-commerce sites would help the company build its brand and have more pricing leeway. Premium wholesale partnerships like The Armoury with Foot Locker (FL) can also provide a lift to pricing.
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