Under Armour might be making a fatal mistake in its bid to save itself
Scott Dalton / Invision
- In a bid to stave off sales declines, Under Armour expanded into "moderate retail" chains like Kohl's, DSW, and Famous Footwear.
- This was supposed to increase sales and replace retailers that had gone bankrupt, like Sports Authority.
- A lack of proper segmentation has tarnished the Under Armour brand, however, and it has made other retailers wary.
Under Armour may have just shot itself in the foot.
The company, which had a rough 2017 and is still looking for a turnaround, may not be making the moves it needs to put itself in a good position.
One analyst, Sam Poser of Susquehanna Financial, just downgraded Under Armour's stock from neutral to sell in a note to investors.
One of the principal reasons, Poser says, is the brand's embracing of "moderate retail," meaning discount chains like Kohl's, DSW, and Famous Footwear.
That expansion is degrading the brand, according to Poser, who doesn't mince words in his note.
"We contend that, in order to reaffirm [Under Armour]'s place as an aspirational sports brand, all Under Armour product must be pulled from Kohl's, DSW, and Famous Footwear," he writes.
A lack of differentiation between the levels of retail has consumers confused. If they can get the same or similar items at a retailer that is known to hold more sales throughout the year, they're less likely to go to more upmarket sports retailers like Dick's Sporting Goods.
Under Armour doesn't sell its entire line at Kohl's, instead reserving its most expensive items for its own retail stores and other outlets. Instead, it brought back some of its older shoe models and its basic sportswear in new and exclusive colors to sell at the department store, Citi Research analyst Kate McShane wrote in a note last year.
Discounts and promotions are more common at moderate retail chains. According to a UBS research note on the stock from 2017, there were "signs that the Kohl's launch caused increased markdowns across the channel" for Under Armour - not exactly the intended outcome of the partnership, and one that could decrease the likelihood of retailers like Dick's stocking the brand.
These sports-focused retailers are now planning on stocking less Under Armour, Poser says, continuing a precarious slide into discounting for the brand. The retailer's shelf space is instead being taken up by competitors' private-label brands.
This damage to Under Armour's brand is coming at a time when it's already in need of a boost, after it seemingly missed the sportswear industry's shift to more stylish athleisure apparel. Under Armour is now in the midst of a pivot from a performance brand to a lifestyle brand, but the process is slow-going, and a poor consumer opinion of the brand will only make it more difficult.
"The opening of distribution to Kohl's, DSW, and Famous did change the perception of Under Armour, and not for the better," Poser says.
The Future of Retail 2018 by the BI Intelligence Research Team.
Get the Slide Deck Now »
- 5 Best places to visit near Darjeeling
- Climate change could become main driver of biodiversity decline by mid-century: Study
- RBI initiates transition plan: Small finance banks to ascend to universal banking status
- Internet of Things (IoT) Applications
- 10 Ultimate road trip routes in India for 2024
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market