Apr 20, 2009
As the economy continues to take its toll on sports, sports retailers, and people in general, many have become concerned with the survival of many of the mid-range or smaller companies. One company that has had to temper expectations amidst the recession is the sports clothing retailer, Under Armor. The company has seen its stock price nearly cut in half in the last year, and more than one investment firm has downgraded the company within the last six months, further adding to growing concerns about the stability of the company. The days of continuing record profits are over, and now the question is whether or not Under Armour will survive the long haul? The company’s strategy? new products, scaled back marketing and retail openings, and innovative technology,
Under Armour, known for its moisture-wicking shirts, is rapidly expanding its footwear business and made its biggest splash to date in January when it entered the $5 billion running shoe market. That will soon be followed by a soccer cleat launch to help grow its presence internationally…
Analysts say Under Armour will be paying closer to attention to how much it spends on marketing and athlete endorsements. Under Armour spent around $55 million in marketing in 2008. Company executives have also said they’ll pull back on hiring plans.
One decision the 2,200-person company made was to freeze new retail store openings this year. The move is a smart one, industry experts say, as shoppers are becoming more conservative about how much they spend.
Dick’s Sporting Goods, one of Under Armour’s biggest retail partners, is also scaling back its expansion activity. Stifel’s Shaw [Ed. -- Thomas Shaw, an analyst with Stifel Nicolaus & Co.] said the sporting goods giant grew its square footage by 12 percent last year, but that’s expected to drop to 4 percent this year. And that will ultimately impact Under Armour’s retail presence, he said.
I have discussed Under Armour and its battle with the economy on this blog previously (See: Under Armour…Protecting this house? Not so much) and quite frankly, I’m running out of ways to put “protect this house” and “Under Armour” in a title, so it needs to stop. While it looks like Under Armour is finally taking steps to weather the economic storm (i.e. freezing new retail store openings), one has to wonder if they really have the staying power to compete with the sports apparel giants, like Nike and Adidas. Especially when they have decided to not cut prices on any of their apparel, and the price point for their new soccer shoe is over $200. Is their brand strong enough to retain customers and generate new revenue when their price points are pre-recession, larger companies can afford to slash prices and make comparable products, and consumers are willing to spend less?
The sports apparel market has lost many a competitor before, now we’ll just have to see if they’ve claimed another victim or if Under Armour can regain its composure and continue its fight with the sports merchandising giants.
Baltimore Business Journal — Under Armour’s Growing Pains (via )
2 comments
It will be interesting to see how they ride things out (or whether they will), but I think that in a lot of ways they have differentiated their brand and message from Nike and Adidas enough to retain loyal customers and not simply lose people based on price. While they may not do as well, I think that they’ll stick around.
Things do appear to be looking better. I think I read somewhere that the new shoe that they brought out (the one that “puts them in the realm of foot apparel”) has sold well thus far. While I agree that they have separated their brand from Nike and Adidas, I don’t know if they’ve done enough, especially in the face of a recession, to obtain new customers…and at some point, i’m worried that the stagnant consumer base could pose a problem.