Final Post

I have very much enjoyed learning more about the Under Armour brand and company. This company is very passionate and I think I would love working for them. I have actually contemplated applying before, but I don't think my husband would be up for moving. I really don't have any advice for them as I think they are making good decisions. Especially since right now our country is in a recession, but they are showing record sales. I have followed stock price intermittently and would recommend as well as invest in them myself. They still have a lot of room to grow and I feel are making the strategic decisions to take advantage of the market.

Forbes video

The link below is to a video posted on the Forbes website that centers on Under Armour breakthough into the sports apparel industry and the mentality and mindsets it has instilled in a younger generation.
http://video.forbes.com/fvn/sportsmoney/yes-sm-under-armours-brand?partner=email

Post Workout Recovery Suit = NEAT!

Today while looking through videos on You Tube I found the one below:
http://www.youtube.com/watch?v=kL8by1IZjCU

I had heard about this recovery suit in passing but never looked for any information on it. This technology seems awesome. The suit is meant to be worn for approximately 24 hours after your workout and uses compression to keep your muscles from swelling and promote quicker rebuilding and recovery. For someone who is active it isn't really that expensive (top is $100 and bottoms are $90) for the recovery it offers.

Kevin Plank, CEO and founder of Under Armour

Kevin Plank comes from a middle class family in Maryland. He is the youngest of five and loved football. In college while playing for the University of Maryland he became frustrated with the heaviness of his cotton t-shirts soaked in sweat and would often change multiple times to keep them from weighing him down. According to friends and family he was always tinkering in new businesses and concepts and decided to go to a fabric store to see if there was a material that would work better than cotton. He found a synthetic material that wicked the moisture away from the skin keeping the shirt weightless and athlete cool. He then marketed these shirts to pro-football player friends and convinced them to hand them out in the locker rooms.

From a Sports Illustrated article on the story of Under Armour, "The company says its operations steer toward the unconventional. Unlike many other firms, all campaigns and creative design are done on the property. No contract agencies are involved in business operations. There are also no grand facilities to wear-test products, except for a turf area to test some aspects of shoe performance. The company says it prefers to use real-world conditions, including terrain differentiation and weather factors, while receiving feedback from various running clubs and their stable of athletes."

Although I have found no formal designation of centralized or decentralized structure I would lean towards decentralized. Several places I have read that the corporate culture is that of an athletic team. That team meetings are referred to as huddles and employees are treated as teammates instead of subordinates. These types of descriptions seem to create an environment where input is encouraged from all levels.

A note on partnerships....

Here are a few partnerships Under Armour has undertaken.

Most recently UA has partnered with IMG Performance to develop a comprehensive athletic training program called "Combine 360". IMG is an institute that offers athletic training and schooling to all ages. Their goal is to establish a global measurement standard for improved sports performance, health and fitness.

UA partnered with Unlimited Sports Group (USG) in 2007 to manage the distribution of UA products in Belgium, the Netherlands, and Luxembourg.

Ripken Baseball Inc. and UA formed a five-year business alliance in April of 2009 for Under Armour to have an increased presence at Ripken's baseball properties. Ripken has a long-time relationship with NIKE that ended last year.

For those MMA fans....

For those mixed martial arts fans GSP just signed a multi-year contract to be the face and body of Under Armour. MMA is growing and has been growing in popularity very rapidly. I think George St-Pierre will resonate with many people that Under Armour may have not previously touched. http://finance.yahoo.com/news/Under-Armour-Throws-KnockOut-prnews-2037676487.html?x=0&.v=1

Interesting Find

While reviewing the management of Under Armour I noticed an interesting item: all of them are fairly new. Below is the link to UA's management page.
http://www.uabiz.com/company/managementTeam.cfm

I found this interesting. Does this mean that UA is positioning itself for broad expansion? Possibly. This managament team is full of experience from all with top executive jobs at other large retailers like Lands End. The price tag for this experience can't be small.
UA is definitely making sure it has the right people for the jobs.

You Tube Video

http://www.youtube.com/watch?v=FrobbYe7Iyk

You Tube video of Kevin Plank, founder and CEO of Under Armour talking about the history of the brand and the future.

UA Gear Packs

I receive email updates and offers from Under Armour and this particular ad caught my attention. For the holidays UA has launched "gear packs". Basically these are outfits that UA has put together to make the shopping experience easier. They are labeled based on what the person you are buying for needs or likes. For instance one of them is called "Women's Golf Gear". When you click on that it redirects you to a page where you can put the needed sizes in and click "Add to Cart". How easy is that???? You can also pick and choose the items you actually want to purchase in the gear pack. I believe this is UA's way of creating add-ons to sales that would normally only be one or two items. If customers see these items all together and see that they match and coordinate they might actually be more apt to purchase all of these items that make up this outfit. Isn't that why stores have manequins displaying their latest fashions in the storefronts? This is UA's attempt to recreate this experience. Below is a link if you would like to check them out.
http://www.underarmour.com/shop/us/en/gifts/gift-packs

Third Quarter Earnings

Under Armour reported an increase of 16.2 % in net revenues for the third quarter ending 9/30/2009. While concentrating on lowering inventory levels and increasing cash flow Under Armour has outperformed itself in hard economic times. It was noted that although the overall increase in sales, revenuesm and profits there was a substantial increase in the selling, general and administrative expenses. Higher personnel costs and the continued expansion of the company's outlet stores were given as reasons for this. Below is the link to the press release which includes consolidated financial statements.
http://investor.underarmour.com/releasedetail.cfm?ReleaseID=418803

Foreign Markets

Here is an article from Motley Fool about NIKE's big jump into the Chinese market. This may represent opportunities lost for UA. It also may be a signal that in order for UA to compete with NIKE they will have to start putting more concentrations into foreign markets. It is possible for UA to extend their first mover advantages in the compression sportswear into these new markets.
http://www.fool.com/investing/international/2009/10/09/nike-jumps-into-china-with-both-feet.aspx

UA President Address Current Economic Conditions

Below is a link to a recent article about the President of Under Armour, David McCreight, addressing the economic downtown and how Under Armour plans to continue growing, expanding, and hiring as needed. Although, currently the company has been concentrating on controlling costs.
http://www.baltimoresun.com/business/bal-bz.underarmour13oct14,0,4934973.story

Product Placement: Another Facet to the Marketing Strategy

Under Armour has used product placements as a main market strategy to increase consumer awareness. Any Given Sunday was Under Armour’s first break at product placement in a blockbuster movie. In 1998, Plank sent a sample of Under Armour to the movie’s casting director and received the contract. The company used this as a jumping board and has since appeared in such movies as The Replacements, The Gridiron Gang, and Dodgeball. Under Armour did not stop there and dove into the cable television network and video games. In the first half of 2008 Under Armour had more than 3000 occurrences on cable television. Under Armour can be seen most notably in HBO’s The Wire and MTV’s Real World Road Rules Challenge. Video games that include Under Armour products include Tom Clancy’s Ghost Recon 2 and Tiger Woods PGA Tour 2006. These product placements reach multiple types of consumers ranging from adults to children. The strategic use of the product placements shows Under Armour products being used in a variety of different situations and scenarios. Under Armour finds this strategy important enough to have a member of the marketing team that works full-time in Los Angeles pursuing these product placements.

Sponsorships important to Under Armour

Part of Under Armour's marketing strategy is strategic sponsorships. Sponsorships, whether sports-oriented or charitable, show Under Armour’s dedication to community involvement. Under Armour sponsors events across the sports spectrum from football to running to lacrosse. Event sponsorships include ESPY Awards Show, Winter X Games, 2009 NFL Scouting Combine, College Football All Star Challenge, Baltimore Marathon, and All-American Lacrosse Classic. Under Armour created the “Power in Pink” campaign to raise funds for breast cancer research. They also sponsor several other community organizations including: The Ronald McDonald House, The V Foundation, Conservation Fund, The Rock Foundation, Boomer Esiason Foundation, and Living Classrooms Foundation. These sponsorships increase brand awareness while enhancing brand equity and help maintain a high quality brand image. The exposure received by sponsorships and product placements has been irreplaceable for the directly related growth that has been seen by Under Armour in the past 13 years. See the link below to be directed to UA's web page dedicated to sponsorships: http://www.uabiz.com/company/community_sponsorships.cfm

October 16 Stock Price Comparisons

UA closed out at $29.95 Friday, down .33. 52-week range is $11.94 to $31.24. NIKE closed at $65.10.

Interesting Story

Under Armour sponsors many different events, but their most know is the Baltimore Marathon. The link below is a story from the Baltimore Sun about a "shadow" run that is taking place in Iraq. Not really much about Under Armour, but definitely creates good PR for just being associated with the race.
http://www.baltimoresun.com/sports/outdoors/baltimore-marathon/bal-marathon09oct09,0,6026230.story

Outsourcing
Most all of Under Armour’s products are manufactured by unaffiliated manufacturers. They have 23 primary manufacturers located in several different countries. These manufacturers are required to adhere to Under Armour’s strict code of conduct for suppliers that can be found on their website http://www.uabiz.com/corpResponsibility.cfm. The code of conduct details Under Armour’s expectations and requirements of firms employed to manufacture their products and includes policies on forced labor, child labor, harassment and abuse, discrimination, health and safety, hours of work, wages and benefits, overtime compensation, environment, and legal and ethical business practices. Under Armour also allows third-party licensees to purchase the rights to use the logo and distribute products under the brand image. The product, marketing, and sales teams work with these licensees in order to ensure that the brand image is upheld in their products.
Vertical Integration
Under Armour packages and distributes the majority of their products through two distribution centers in Maryland. They also operate an online retail store with a wide offering of their products. Control over the distribution centers is an example of backward vertical integration and allows Under Armour to directly effect customer satisfaction in making sure that the products are of quality and that they are packaged with care. This also helps UA operate their online store. The online store is an example of forward vertical integration. This creates a one-on-one relationship with the customer and can be used to strengthen brand allegiance as well as brand image. The online store also creates a better market visibility especially since their major competitors also operate online stores.

Both outsourcing and vertical integration have been used strategically by Under Armour to cut costs and create better market visisbility.

Transformation

Under Armour initially started out with a focused differentiation strategy. Their focus was on their innovation of the perspiration wicking performance wear. It all started with a t-shirt; one that could be worn under football pads and not get heavy with sweat. Kevin Plank, the originator and CEO, himself was a football player and could identify with these needs. He began marketing to collegiate teams across the country. The shirt worked and founds its niche, so it sold. They then decided to make other performance wear: some for when your hot, some for cold, and some for any weather. As they grew, the performance wear industry saw new entrants. More established companies as adidas and NIKE began producing their own lines of performance wear to directly compete with Under Armour. At this point Under Armour could see that their hold in the niche market would likely disintegrate if they did not broaden their focus and make a bigger name for themselves. This approximately the point where Under Armour switched more to a broad differentiation strategy. One of the key factors in determining this is most like their strategy were two factors: charging a premium price and stressing constant innovation. Because of the companies constant innovation and products that work customers are willing to pay the higher price. Under Armour has created a brand image that is very important to the maintenance of this strategy and their continued growth. They are still fairly small-time in comparison to the industry leaders (NIKE, adidas).

Stock Price 9/24/09

Stock opened at $28.69 and closed at $28.13 which is $.35 down from Wednesday's close price. Overall the past month or so this stock has not seen any large increases or decreases from day-to-day. In the past month it has been steadily increasing from under $23, peaking at $30.50 and steadily leveling off around $28.

Mission Statement

Under Armour’s mission as stated on their website is, “To make all athletes better through passion, science, and the relentless pursuit of innovation”.
http://www.uabiz.com/company/mission.cfm
Under Armour takes pride in their performance apparel that is designed to keep athletes cool, dry and light throughout the course of a game, practice or workout. It touts that the technology behind their product assortment is complex but the program for reaping the benefits is simple: wear HeatGear® when it’s hot, ColdGear® when it’s cold, and AllSeasonGear® between the extremes. Their goal is to replace basic cotton products with their innovative merchandise.
Under Armour's mission statement contains the following effective elements:
Graphic, Flexible, Easy to communicate, Focused, and Desirable
It has the following shortcomings:
Too broad, Slightly vague

Marketing Strategy

UA has limited marketing dollars in comparison to their competitors. These dollars must be used strategically in order to achieve advancement in the market. Under Armour’s mission as stated on their website is, “To make all athletes better through passion, science, and the relentless pursuit of innovation”. The company utilizes a two-part marketing and branding strategy. The first part is selling its products to high profile athletes and teams. The other part involves using product placements and sponsorships. Since its inception the company has relied on positive word of mouth customer satisfaction. As detailed in the most recent Annual Report, Under Armour “seeks to drive consumer demand for products by building brand equity and awareness as a leading performance athletic brand”. Advertising campaigns, promotions, and marketing are all internally produced in order to keep key control over the brand image. Selling products to professional and collegiate athletes and teams allows Under Armour to create an ongoing marketing scheme that also increases its brand authenticity among potential consumers. These athletes and teams wear their Under Armour during the game and at practices. An ongoing marketing scheme is created by the various types of media that could capture the team or athlete performing while wearing Under Armour. For instance, Devin Hester is a wide receiver for the Chicago Bears football team. He also has a sponsorship agreement with Under Armour. Fans at the Sunday night football game will see him sporting the Under Armour gear as well as fans watching the game on television or even streaming it live online. Assume that he catches the winning touchdown in this game and his picture ends up on the front page of the Chicago Tribune or even in an article in the ESPN Magazine, yet another set of consumers are exposed to the image of this professional athlete performing while wearing Under Armour. All of these images reach different consumers. They all see a professional athlete using Under Armour. They also see it working for the athlete. This repetitive image invokes authenticity into the brand image. While Under Armour seeks established athletes, their main goal is to catch the new and upcoming sports stars. This strategy falls in line with their on the edge of technology, innovative reputation and it is also less expensive. Under Armour has used product placements as a main market strategy to increase consumer awareness. Any Given Sunday was Under Armour’s first break at product placement in a blockbuster movie. These strategies along with their fierce and passionate commercials create a brand that is viewed as a force to be reckoned with.

An External Environment Analysis

UA achieved early success in the compression performance niche industry. This success allowed them opportunities to expand into other sub-markets of the sports apparel industry and to experience large growth rates in an otherwise saturated market. Sustainability and continued growth are their main goals. UA wants sustain their competive advantages and continue to experience record growth rates. Competitors like NIKE and adidas are very large, established corporations in comparison to Under Armour. Both NIKE and adidas have created their own competitive compression performance lines which means that Under Armour's first mover advantages will be diminishing. Both of these industry giants have a much larger marketing budget than that of Under Armour. The economies of scale that NIKE and adidas possess could make it hard for Under Armour to continue diversification of products. The state of the current economy has triggered a decrease in consumer spending which could have continued effects on sales numbers in the months to come. (As shown in earlier post Under Armour has posted earnings and growth as recent as the second quarter 2009.) Brand image and strategic use of limited marketing dollars will be key in Under Armour's continued success.

Stock Price

Today UA opened at $23.23 and closed at $25.41, up $2.18.
This about the median in a 52 week range from $11.94 to $43.52.
Major competitor, NIKE, Inc closed at $55.35 today with a 52 week range from $38.24 to $68.00.

Earnings Up, but so are Concerns

In the midst of one of the worst economic downturns in the history of the United States, Under Armour posts a second quarter increase in net revenues overall, apparel net revenues, and net income.
Kevin Plank (the founder, Chairman, and CEO) noted, "We have a powerful brand that resonates with consumers, a growth platform with enormous long-term opportunity, and a strengthening balance sheet. In 2009, we will continue to make key investments in our growth drivers, increase the level of expertise of our team, and become better operators. An incredible path lies ahead for our brand, and through innovation and execution we will deliver our message of performance to athletes across the globe."
Click on the link to read the news release: http://www.uabiz.com/news/releasedetail.cfm?ReleaseID=399345
Although overall this is great news for investors of UA. There is one underlying potential cause for concern. UA introduced a new addition to their footwear division in January 2009. Footwear sales have substantially decreased in comparison to the second quarter of 2008. In the news release the company states that this was predicted. UA is finding that this market is unlike others in which it operates. Although it sees the same competitors as in the apparel industry the footwear industry is severely oversaturated and there might not be enough market share to cover the costs of this division. To remain on the cutting edge it is important for UA to remain deft and able to take advantage of other first mover advantages in the sporting goods industry. UA's footwear offers nothing new and innovative to the footwear industry which may be the downfall for this diversification.

We Must Protect This House

Here is a link to their first major commercial from the "Protect this House" campaign:
http://www.youtube.com/watch?v=dnECY26PSHk

All of their marketing campaigns are intense and passionate... I love them.

"We Must Protect This House" is used as a rally cry in many stadiums across the country.

Why Under Armour?

The company is fast-growing and on the edge of sports technology. Under Armour was the first to introduce the moisture wicking fabrics used in their products. They found a niche in the sports apparel market, rapidly expanded, and have created a competive force against industry giants as NIKE. The story of Under Armour encompasses the freedom and opportunity that comes with capitalism. They design products for their consumers by trying to to remain in touch with those who use their products.

While enrolled in a previous marketing class I used this company for a paper that analyzed it's market positioning. I became very intrigued with the company and admired their marketing techniques.

My husband and I began doing Crossfit approximately three months ago. About that time I bought my first Under Armour products and have been addicted ever since. I think it would be interesting to continue to follow up on this company.