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Under Armour: Is The Only Way Through?

As Under Armour founder and chairmen Kevin Plank unveiled a new brand message – “The Only Way is Through” – SEC filings revealed that in the last quarter a hedge fund made a significant bet on Under Armour’s future performance. Lone Pine Capital LLC purchased a nearly 7% stake in the company.

The only way through can mean many things – as can an investment of this size. Is it a vote of confidence in the current management and strategy or a reflection that substantially better things are yet to come… perhaps after a change?

Under Armour has been beset by a series of executive changes and missteps over the last 18 months. Former CEO Plank stepped down in October, a strong marketing executive departed for Nike, a toxic sales culture led to a series of changes in the company’s code of conduct, and an ongoing SEC investigation into accounting practices was revealed. From a business perspective, the company made slow progress during a three-year turnaround strategy.

The company’s recent performance may signal that progress is accelerating. Although North American sales decreased by 4% in the company’s 3rd quarter (ending September 30, 2019), gross margin improved year-over-year and the company successfully shrank revenue generated by the off-price channel. However, a major push into footwear stalled as category revenue decreased 12%. Soon to be released fourth quarter results will reveal if the brand has succeeded in returning to growth.

But Under Armour still faces challenges. Has the sales-first culture of the last two decades – including forcing sales through the off-price channel – really changed? Has brand strategy,  merchandising and design replaced the sales team as the drivers of the brand – as it did at Nike long ago? Can the company cope with the struggles of a large account – Kohls – as the former business driver Dick’s continues a push to private label? Can the brand attract women? Will performance drive sales as athleisure maintains a grip on athletic wear? Can the retail business expand beyond outlets into full-price channels? Perhaps the Only Way is Through – but that sounds suspiciously like the sales team still steers the ship and has a male-focused bent.

New CEO Patrik Frisk has wrestled with these questions since joining Under Armour as President in 2017. 2020 will reveal if he has orchestrated the necessary change – and indicate the path Lone Pine might advocate as significant shareholders.


David Weiss

David is an accomplished retail executive bringing nearly 20 years of industry experience to each client project. David has worked for multi-billion dollar global companies, venture-funded start-ups and private-equity owned turnarounds. He is known for identifying opportunities, creating focus, and building cohesive business strategies.

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