Under Armor, Inc. (NYSE: UA) is edging the fine line as it struggles to correct its vessel after a fourth quarter earnings report that missed expectations. The brand, which recently appeared in mid-priced department store Kohl’s acknowledged for its stepping discounting, will now be inflowing into a contract with discount shoe retailer DSW. The transaction involves a relationship to DSW stores, said Debbie Ferree, vice chairman and chief merchandising officer for DSW in a conference call with analysts after reporting 2016 forth quarter earnings.
Analysts are concerned that this attempt will impact Under Armor’s brand perception, especially for its still-new and struggling footwear line. “I think for Under Armor, it’s tough because they need to find new points of distribution,” B. Riley & Co. analyst Jeff Van Sinderen told Footwear News. “It is a bit of a double-edged sword, they need to grow, but in doing so, they may risk compromising brand image.” This attempt could aggravate another brand’s dealing with.
CEO Kevin Plank’s comments on CNBC praising Trump make it “almost impossible to effectively build a cool urban lifestyle brand in the foreseeable future,” according to the note by Susquehanna International Group, an industry research firm. Though Susquehanna does not assume the brand will lose his deal with basketball star Steph Curry, “it simply can not be good for business if the face of Under Armor spoke out pointedly against the CEO’s comments,” the Misty Copeland, and Dwayne “The Rock “Johnson also did.
According to NPD sports analyst Matt Powell, younger shoppers prominently consider the moral implications of where they spend their dollars. “Millennials and Generation Z want brands and retailers to be transparent about their stands on social issues,” Powell told The Baltimore Sun. “If those values ??do not align with their views, they will take their business elsewhere.”
In reply to the backlash Plank’s comments made, Under Armor launched two separate statements and to full page open letter in The Baltimore Sun to clarify the words and come out against Trump’s executive order travel ban. These issues dovetail with broader distress about the company’s mix of slowing growth, and Susquehanna has cut the target price of the stock in half to $ 14. This comes after a weak fourth quarter earnings report where Under Armor’s growth rate shrank dramatically and it cut its annual forecast.
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The chief problem: Under Armor’s products are not savvy enough yet, according to Plank. “We need to become more fashionable,” Plank said during a call with analysts after the last quarterly earnings report. “The consumer wants it all. They want product that looks great, that wears great, that you can wear at night with a pair of jeans, but that also does perform for them. “
The company is confessing it completely misread the upmarket trend of athleisure, instead relying on copious logos and basic styles of sportswear.
Under Armor released Under Armor Sportswear in 2016 as an effort in the athleisure space, in partnership with designer Tim Coppens. With its $ 1,500 trench coats, it has failed to make the splash the company was hoping for and it is likely the company is still missing the medium between mass market and high end that Nike and Lululemon inhabit.
Under Armor Facebook
Securing athleisure is dire for Under Armor because it is the chief trend in North America, which comprises for 80% of the company’s online sales. The athleisure trend is not going anywhere, industry experts have told Business Insider.
The loss of retail channels like Sports Authority has not been kind to Under Armor and the shift to mid-market department stores like Kohls will be rocky. Relying on discounts will not be the viable long-term strategy, as it will dilute the brand’s halo effect and make the move into athleisure even more difficult, according to Shelly Banjo at Bloomberg. “Will the lower-priced product negatively impact the sales of the higher-priced product?” Powell told the Baltimore Sun. “Other brands have done it, but it’s tricky. You’ve got to have clear lines of distinction.”