After years of rapid growth, Under Armour had a disappointing 2017. Sales growth slowed amid store closings by key department stores and retail partners; the competition grew tougher; and fluctuating demand for athletic apparel by consumers made it a challenging year.
Following a disappointing third quarter, the brand’s North American holiday sales dipped (yet again), on Feb. 12th reporting a fourth quarter loss of $88 million. Even its uniforms for Team USA speed skaters at the 2018 Winter Olympics are being mocked for what some are calling their uniforms’ “crotch spot” panel.
GlobalData Retail’s Managing Director Neil Saunders attributes its rocky 2017 to a slippage of brand identity which has made the product “feel commoditized and ubiquitous” by creating a cheaper line for retailers like Kohl’s.
As Bloomberg adds, “The brand disappointed investors on several fronts last year. It botched the launch of the (Stephen) Curry 3 sneaker. Demand for some of its products fell in North America. And it struggled to manage the growing pains of rapid expansion, such as the supply-chain disruptions that came with rolling out new technology.”
In an added challenge, Dick’s Sporting Goods, Under Armour’s most important customer, is starting its own private label merchandise. Nike and Adidas remain formidable rivals, too. Yet none of that is stopping UA from launching its biggest campaign to date.
On the bright side, while waning U.S. demand for its apparel caused a steep loss in the fourth quarter (ending Dec. 31), UA grew its international sales and its online/direct-to-consumer revenues, offsetting a big shift in U.S. retail patterns that has seen downturns from Dick’s Sporting Goods, Foot Locker and others.
It also just came in at #5 in the wellness category for Fast Company‘s Most Innovative Companies list.
— Under Armour News (@UAnews) February 20, 2018
Ever optimistic, Under Armour’s exec team is confident they can pull through this. They are beginning to focus more heavily on non-performance, athleisure apparel and footwear—which is where the industry is currently trending. As it tries to expand its market share in North America and internationally, CEO Kevin Plank is taking lessons from 2017 to turn around the brand.
In fact, Plank says the company will focus on its brand in 2018, commenting on last week’s quarterly earnings call with analysts, “In 2017, we were a loud company and a quiet brand. In 2018, our plan is to be a quiet company and a loud brand.”
Helping turn up the volume—Under Armour’s new HOVR connected shoes for men and women, a low-top (the Sonic) and a mid-top (the Phantom) shoe design with built-in high-fidelity sensors that measure cadence, distance, pace, stride and steps by connecting to the brand’s MapMyRun app.
— Under Armour News (@UAnews) February 17, 2018
With plush cushioning and a built-in sock, it was unveiled on Feb. 1st and sells for $110 (Sonic) and $140 (Phantom), respectively. UA also sponsored a HOVR pop up experience at the NBA All-Star Weekend that just took place in Los Angeles as part of a cross-U.S. tour.
As Business Insider notes,
They’re more outwardly stylish than any other Under Armour shoe, and they represent a drastic departure from the brand’s usual focus on basketball shoes. The brand is throwing everything it has behind the new shoe, and the campaign for the shoe was the biggest and most expensive marketing campaign the brand has ever done for a product, Adrienne Lofton, Under Armour’s senior vice president of global brand management, told Fast Company.
The Bluetooth-powered sensors located inside the thickest part of the midsole, are rainproof, and the Record chip is designed to outlast the life of the running shoes themselves so battery power is not a problem. The MapMyRun app analyzes the data and the latest Record sensor enables untethered runs – sans smartphone.
Welcome to the new world of running – #UAHOVR
"Connected running with the HOVR Phantoms is just like running with regular shoes—just lace up and go, but you let the shoes do the tracking." https://t.co/SQeErTw605
— Under Armour News (@UAnews) February 9, 2018
A soon-to-be-released coaching feature will add tips, for example, how to improve pace and splits by changing form and taking shorter or longer running strides. Under Armour says its HOVR foam tech is meant to provide a “zero gravity feel.”
Plank calls the global launch campaign for HOVR as an example of the “amplified storytelling” the company will use going forward. UA has enlisted local run crews in cities including Shanghai, Berlin, London (London Brunch Club) and New York (Harlem Run) to test the new shoes and spread the word once they hit the streets.
The brand is setting up HOVR House event spaces around the globe to act as a social and content hub for runners, starting in Shanghai, then Los Angeles (NBA All-Star Weekend) then Austin (SXSW) and Washington, D.C. (annual Cherry Blossom run).
“2017 was a catalyst for us to begin strategically transforming Under Armour into an operationally excellent company,” said Plank told analysts on its earnings call last week.
“Our fourth quarter and full year results demonstrate that the tough decisions we’re making are generating the stability necessary to create a more consistent and predictable path to deliver long-term value to our shareholders. We’ve learned a lot of lessons in 2016 and 2017. For us as a brand … we think about footwear, women’s and international being our three growth drivers.”
Patrik Frisk, hired last July as president, added, “My goal as a leader in this very complicated world is to make things understandable for the organization — give clear direction and vision so people understand why they’re coming to work every day. One of the great things we did when I came in here is, Kevin [Plank] and I partnered on recrafting the vision, mission and values — making sure that we took all the good from everything that got the brand to this point over the past 20 years and refine it and focus on what we need in place for the next 20 years.”
“We believe that we more or less invented this category, and we need to continue to drive that aspect of what we stand for. We need to do it, of course, with style and trend in mind, but we need to do it also with innovation. We need to bring product to market that people didn’t know that they needed, but once they have it, they can’t live without it.”
The path to winning? “To think about the consumer in the lens of UA,” Frisk explained. “So inside of the space in which we compete, what choices are consumers really making in that space as they acquire a performance brand? We also have to understand what’s constant for us in that space as a brand. How do you make sure that you stand for something in that space, and how do you think about that from a longevity perspective?”
Lessons have also been learned on the marketing side of the brand. As Lofton told Fast Company, she took notes from the launches of the Curry 4 basketball shoe and Dwayne Johnson’s Project Rock collaboration, particularly for the role of social.
“Our Curry launches have been incredibly successful, and mastering the unboxing experience has been a big lesson and something we’re constantly trying to improve,” Lofton says. “When we launched the Project Rock line, it completely sold out, and that storytelling was only done through [Johnson’s] and our social and digital channels. So maximizing digital, leading through social, all of these things are lessons we’ve learned, now we’re taking those lessons to HOVR.”
— Under Armour (@UnderArmour) February 16, 2018