What s up guys! It s Jason here and welcome to my YouTube channel, Sports Insight.
Even if someone doesn t know the motto, Just Do It, is trademarked by Nike, most people
do recognize the slightly rounded checkmark as the ever-present Nike logo. In the world
of sportswear worldwide, Nike has more or less dominated since it overtook Reebok and
Adidas in the 1980s for annual revenue of $37.4 billion as of 2020. From the early to
mid-2000s, Under Armour was considered the next big thing, or perhaps the next big Nike
as the Maryland-based company grew rapidly. Its sales increased as did its category offerings.
Yet these days, while Under Armour is still around, it s lost a lot of buzz. In fact,
you would be hard-pressed to find many people who believe the company is on track to lead
in any of its diverse product categories. It s lost the cool factor that it once had,
but can it regain it with only more sales? Time will tell. For now, let s check out it
s beginnings as one entrepreneur s hard-won small business to a well-known brand that
s struggling to reach that next level of gains. Today we ll explore the history of Under Amour,
what happened to Under Armour and is under amour going out of business or staging a come
back.
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I would really appreciate it. The more engagement a video like this gets, the more likely the
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week. Thanks for doing that and now let us continue on with the Rise and Fall of Under
Armour.
Sales, Sales, and More Sales
How Under Armour came about is the American Dream at its finest. If I googled, how to
start your own business right now, many results would probably dispense advice that boils
down to: solve a problem. Well, the founder of Under Armour, Kevin Plank, began to do
just that in 1996. A college football player at the University of Maryland, Plank found
himself dealing with the recurring problem of having to exercise in sweaty cotton t-shirts
and athletic wear that didn t adequately absorb his sweat. It was uncomfortable. It was disgusting.
At the same time, he noticed that his compression shorts stayed dry and wanted to use that same
material to create an entire sportswear line for professional and casual athletes alike.
Once he graduated from the University of Maryland, Plank did eventually find his own blend of
synthetic materials. Like many entrepreneurs, Plank maxed out his five credit cards at a
total of $40,000 and took out a Small Business loan to cover the initial logistical costs
of opening a business: trademarking a name, creating prototypes of material that would
completely shield the skin from sweat, and marketing costs.
Just in case you don t particularly like the name Under Armour, it might be reassuring
to know that the name actually came about because Plank couldn t trademark his first
preferences of Heart and Body Armor because they were already taken. Maybe it s for the
best that those names didn t work out because even one of Plank s brothers couldn t remember
if the name was Body Armor, or Under Armour, as he suggested when he casually asked his
brother how his company, Under Armor, was going. That name was trademarkable, so it
stuck. It s also an example of not waiting for a perfect name or a perfect business plan,
or a perfect anything else as a would-be entrepreneur, because it can bog you down. In the case of
Kevin Plank, he simply moved onto the next natural question---how and where to sell the
prototypes?
Taken out of the start-up playbook, Plank started in his grandmother s basement in Washington,
D.C.. He started sending products to his immediate network of former Maryland football teammates,
some of whom had actually made it to the NFL. In 1997, Plank made his first big sale of
$17,000 to Georgia Tech s football team after doing extensive outreach to different college
teams---to no avail, until now. It gave Plank the confidence boost he needed to keep going.
It paid off in spades obviously. The sale to Georgia Tech gave him the buy-in he needed
with other football teams as two dozen NFL teams also bought sportswear from him. By
1998, he had sold $100,000 in sales and rented an office in Maryland. Fun fact: to this day,
Under Armour is still headquartered in Maryland, albeit in a larger office.
Hollywood Momentum
In 1999, Under Armour reached a turning point when its products ended up in front of the
costume director for Oliver Stone s football blockbuster, Any Given Sunday, with heavyweights
Al Pacino and Jamie Foxx. Fans of the movie probably don t remember what the cast was
wearing, but it nonetheless pushed Under Armour to the next level. In a bid to capitalize
on its newfound presence in Hollywood, its staff chose to forgo their paychecks so that
the company could buy its first print ad in a very high-magazine: ESPN and half a page
at that. The staff s confidence in their employer was well-founded. After the ad, Under Armour
saw a $750,000 increase in its sales.
2001 continued to have breakthroughs in store for Under Armour in the niche sportswear space.
That year, it became the National Hockey League s official supplier and made licensing deals
with Major League and USA Baseball. Major retailers who previously were reluctant to
pick-up the brand, also got on the Under Armour gravy train. By 2002, about 2,5000 retailers
nationwide carried Under Armour.
Diversifying its Offerings,,,But Not Necessarily for the Better
When companies begin to diversify their product categories, it usually makes or breaks them.
Under Armour is a sportswear company, but began to branch out with its performance underwear
in 2002, after rapidly increasing its sales year after year. In 2003, Under Armour continued
to build its brand by investing in more TV commercials with perhaps one of the most memorable
being, We Must Protect This House, which associated Under Armour with the pillars of athletic
success: hard work and grit. The expensive TV commercials only helped to pave the way
for Under Armour to reach $200 million in sales in 2004. Strong sales put Under Armour
on the multi-tasking path of trying to be too much too soon--a sportswear-lifestyle-tech
company all at once.
In 2005, bolstered by its momentum in sales and its increased brand visibility, UnderArmour
went public on NASDAQ, trading as URM. At the time, it was the first company in five
years to double on its first day of trading with its initial asking price $13, but actually
commanding $31 per share. The IPO was successful, raising about $157 million---much needed capital
for the company to reduce its debt load, increase research and development for new product categories
and offerings, and make itself more visible with more retail space. Despite its very optimistic
trading price, all-too-questionable analysts were still bullish on Under Armour, proclaiming
that it might be a fair price given that the company demonstrated strong brand recognition
among youth. In their eyes, Under Armour was the IT brand ready to go head-to-head with
Nike.
The year after its IPO, in 2006, Under Armour continued its quest for category domination,
starting a footwear line as well. It began with football cleats that were successful
from the very start. In its first year, it became the NFL s official footwear supplier
and took over 23% of the recreational football cleat market. That same year, Under Armour
harked back to its 1999 Hollywood claim to fame by having its logo on the Dillon Panthers
football jerseys. They were the team from Friday Night Lights.
In 2010, Under Armour finally broke the $1 billion mark in annual sales. It flexed its
clout by signing a personal endorsement deal with quarterback Tom Brady, for instance.
The deal proved more than profitable for Brady since he took a stock option deal that has
increased by 800% since he signed in 2010. It also set the groundwork for Under Armour
to present itself as the next big thing to other star athletes that it would eventually
sign, including NBA player Stephen Curry and boxer Muhammad Ali. It was a compelling premise
- if it was good enough for the unbeatable Tom Brady, it should be good enough for any
other pro athlete. And it was. Even supermodel and fitness enthusiast, Gisele Bundchen, who
is also Brady s wife, signed onto the brand in 2014 as it sought to compete in the female
athleticwear category. Ballerina Misty Copeland also joined as part of the Under Armour team
in a bid to make its sports bras and tank tops more appealing for women into fitness.
Acquisition Spree & Cracks Beginning to Show
As Under Armour made headway with its endorsements and sales, it went on an acquisition spree
as well in its quest to become primarily a sports-techwear unicorn. In 2013, for $150
million it acquired MapMyFitness, a training app that allows people to track their exercise
routines and food intake in one place, as well as sharing them with other app users.
In 2015, it acquired fitness apps Endomondo and MyFitnessHealth with the self-declared
goal of establishing the world s largest digital health and fitness community. Endomondo was
a social media platform for fitness enthusiasts while MyFitnessHealth was a sort of one-stop
shop for fitness and nutrition related information. MyFitnessHealth cost Under Armour $475 million,
while Endomondo cost the company $85 million.
In 2014, as Under Armour sought to expand its offerings for women and techies, it got
a dent in its armor with accusations that the suits it designed for the US speed skating
team actually slowed them down in the Sochi Winter Olympics. That didn t seem to be enough
to stop Under Armour s growth since in 2016, it became the official uniform supplier for
Major League Baseball. At the same time, it had released other products that continued
to showcase their tech ambitions, such as the UA SpeedForm Gemini 2 Record Equipped,
its first smart shoe. What made it smart? Its ability to track and store data with a
built-in sensor. In addition to its smart shoe ambitions, Under Armour wanted to get
into the business of sleep with its UA Recover, or sleepwear line, marketed as helping the
body recover faster with more sound sleep.
Stretching itself to become everything athletic to amateur and pro athletes alike, in 2017
Under Armour reported its first quarterly loss since its IPO. The stock then tanked
more than 40%. As further signs of shaken confidence in the company and its direction,
five C-levels departed from the company. Tellingly, Peter Ruppe, head of Under Armour s footwear,
soon left. Plank explained the company s less than stellar performance to not being fashionable
enough and having missed the athleisure trend that companies like Lululemon capitalized
so handsomely on. Plank didn t do the company any favors by publicizing his support of then
President Donald Trump, which proved to be unpopular with the most vocal in the traditional
press and social media. His comments cemented the public s perception that Under Armour
wasn t the do-good company that social media loves and was out of touch with select youth.
Under Armour s 2014 mishap at the Sochi Winter Olympics came back to haunt it in 2018. Under
Armour was the official shoe and clothing sponsor for UCLA for $280 million, but a significant
number of its track and field athletes actually claimed that the shoes bottoms were peeling
off. For a company that wanted to be perceived as the best-in-class in mixed sports and tech,
it was embarrassing. That same year, Dick s Sporting Goods CEO voiced his lack of confidence
in the company, describing the brand as essentially stretched too thin across too many stores.
In April of that year, Piper Jaffray s annual Taking Stock of Teens survey underscored the
outdatedness of Under Armour with teens citing it as the #1 old brand that they didn t wear
anymore.
By September, the company saw itself shaken to its very core with $1.3 billion in unsold
inventory and The New York Times reporting on strip club business trips being the norm
within the company. Under Armour didn t wait to take action with the wave of negative publicity---that
same month, Under Armour wanted to show it was changing things in a big way with restructuring
through layoffs and announcing a new focus on opportunities for women in the workplace.
By the next month, October of 2018, it seemed to work because the company beat profit expectations.
However, by 2019, Under Armour was shooting itself in the foot. While it wanted to be
a high-end company, it also showed the world that it had to cut costs to stay competitive
in the hyper-competitive world of athletic gear by prematurely backing out of its agreement
to supply Major League Baseball with uniforms. The move saved Under Armour about $50 million,
but didn t help it substantially in the long-term since in the second quarter of 2019, it still
missed sales expectations with share falling by 15% yet again as a result. Under Armour
projected lower sales in North America to manage expectations as they struggled with
the direction of the company. Maybe to no one's surprise, someone had to be held accountable
for Under Armour s recent dismal performance and that someone was its founder, Kevin Plank,
who resigned as CEO after 23 years. Instead, he became Executive Chairman and Brand Chief
of the company. Soon after Plank resigned, Under Armour revealed
that the Securities and Exchange Commission and the Department of Justice had been investigating
its accounting since 2017. Just weeks later, alleged former Under Armour executives revealed
to the Wall Street Journal that the company had a practice of redirecting factory store
goods to discount chains like TJ Maxx and Marshall s so that each quarter s sales appeared
artificially higher.
Even with questionable accounting practices, like many of its competitors Under Armour
couldn t weather the storm of COVID-19 unscathed. On another embarrassing note, Under Armour
had to extend its payment terms to two of its most notable and expensive brand ambassadors:
Tom Brady and Stephen Curry. On top of that, echoing its abandonment of its Major League
Baseball commitment, Under Armour also terminated its $280 million deal with UCLA, intended
to last 15 years. In an attempt to salvage its reputation, the company focused less on
the need to save money and focused more on not getting enough bang for its buck with
its UCLA sponsorship. During COVID-19, Under Armour also announced it would lay off 600
people to reduce its costs in a time of uncertainty for almost every retailer.
Looking Ahead
And that brings us to today. Unlike retailers like Neiman Marcus and Lord & Taylor, Under
Armour did not have to declare bankruptcy because of COVID-19. Though Under Armour hasn
t rebounded completely from its setbacks, it s using the pandemic as a reset period
to become more competitive. It s investing in e-commerce with a more intuitively designed
website and focusing on social media, especially with its YouTube series of fitness videos.
With its digital and social revamp underway, Under Armour is looking to grow more strategically
by focusing on areas that Nike, for instance, haven t honed in on yet. That includes adding
more rookie WNBA athletes such as Kaila Charles and Tyasha Harris, as well as female fitness
social media influencers generally. In short, Under Armour is realizing that going after
Nike isn t enough to win more market share. It needs to have its own voice, its own niche,
and its own organic followers, who are enthusiastic enough about the brand to weave it into their
social media lives day after day. It s millennial marketing at its best and whether Under Armour
will win that battle is yet to be decided.
So with that said, thank you so much for watching my video. There was a significant amount of
research and production that went into making this video possible. As this is a brand-new
YouTube channel I just started this year - if you enjoy videos like this, please click the
subscribe button and hit that notification bell! If you haven t seen already, check out
my video on the Rise and Fall of FUBU or the Rise and Fall of LA Gear. As always, stay
happy and healthy and stay tuned for another episode of Company Insight next week.