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Is the Under Armour Recovery Real? Industry Insiders Are Conflicted

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Peter Verry
·4 min read
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Under Armour bested Wall Street expectations with its earnings today, with revenues reaching $1.4 billion for the three months ending Dec. 31 against predicted sales of $1.25 billion. And during a call with analysts, president and CEO Patrik Frisk predicted the company would return to profitable growth in 2021.

But is the Under Armour recovery real? Industry experts are conflicted.

More from Footwear News

Camilo Lyon, managing director at financial services firm BTIG, stated in a note ahead of the earnings release that he lacked confidence in Under Armour’s product engine, calling it “weak” and slamming the brand’s lack of focus on the lifestyle segment of the athletic market. Also, he was critical of the level of product the brand brings to retail.

“The glaring piece of the puzzle that remains missing is product innovation which influences brand perception. New designers and merchants have been brought in, yet in our view, the assortment has not evolved whatsoever, meanwhile wholesale partners have introduced their own private-label brands that directly compete with UAA at half the price,” Lyon wrote.

However, this performance focus has been encouraging to some.

“Everything indicates that we’re going to be much more focused on a healthy lifestyle, and that means you need performance products as opposed to athleisure products,” explained Matt Powell, senior sports industry adviser with The NPD Group Inc. “A year ago, I was critical of Under Armour because we were in a major athleisure cycle and they had stuck to performance. It looks like after the pandemic, the market’s going to swing back to them.”

During today’s call, Frisk further cemented Under Armour’s ties to fitness, identifying its target consumer as “the focused performer.” The exec pointed to several key footwear launches last year, including new additions to the workout-ready Project Rock collection backed by Dwayne “The Rock” Johnson and the court-ready Breakthru basketball shoe for women.

Also, Frisk highlighted a pair of performance styles made for the reinvigorated running market — the Hovr Machina and the Phantom 2 — which he labeled as the brand’s largest long-term growth opportunity.

Speaking with FN in June 2020, Powell stated Under Armour’s performance-first position and the running boom were a great match, and that the brand could benefit from the run resurgence. Speaking with FN today, he doubled down on his assertion.

“Lifestyle always matters — it’s more about what the fashion spin is pointing to. A year ago, it was pointing away from performance, and now it has swung back to performance,” Powell explained. “We’re going to see people wearing running shoes on the street again as fashion, we’re going to see less of the sportswear-like athleisure and more performance-oriented athleisure.”

On the call today, Frisk also pointed to the introduction of NBA star Stephen Curry’s namesake label, Curry Brand, as a win. With the new label, Under Armour delivered a new proprietary non-rubber outsole tech with the Curry 8 signature shoe, UA Flow, which Frisk said will be utilized in the run category in 2021.

“The UA Flow running platform will help us accomplish two things: As an innovation, we believe this product’s performance attributes — including its unique traction, ride and energy return structure — will help drive even more significant consideration and authenticity with core runners,” Frisk said during the call. “And second, as our most pinnacle running footwear offering, it will broaden our ability to segment and help differentiate our assortment, thereby creating opportunities for shelf space expansion within running specialty and key wholesale accounts.”

Aside from product, Frisk confirmed today what he stated in October 2020: Under Armour will look to get out of 2,000 to 3,000 retail doors. In the earnings call, he said the pullback process will start in the back half of 2021.

“What we’ll be left with when we’re through that journey is really what we believe are more appropriate doors for us, doors that we feel are going to be wins in other ways — a ‘win with the winners’ kind of mentality — and where we also feel that we can earn shelf space back,” Frisk said.

Additionally, the exec stated Under Armour will continue to put greater effort into its own direct-to-consumer channels, to better execute with e-commerce and full-price brick-and-mortar, and offer an enhanced position in its outlets, which it believes will help elevate the brand.

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