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Under Armour Admits It's Still Not Cool Enough

Under Armour reported disappointing earnings on Tuesday, with its sales forecast falling well short of analyst estimates.
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  • Bloomberg

NEW YORK, United States — At its first fashion show last fall, Under Armour models in fleece sweatshirts and neoprene wedges strode down a concrete runway as deep bass thundered in the background. It was an odd look for the label — still far more athletic performance brand than luxe fashion house — but it was also a conscious effort, an executive said at the show, to court "new customers in new places."

Now it needs to find more.

"We need to become more fashion," Kevin Plank, the company's chief executive officer, said during a call with analysts on Tuesday. "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."

Under Armour reported disappointing earnings on Tuesday, with its sales forecast falling well short of analyst estimates. The company said "higher demand for lifestyle silhouettes caused us to be out of balance with our assortment."

A major part of the company's push into lifestyle has been its shoe business, spearheaded by basketball superstar Stephen Curry's kicks. Under Armour is counting on its sneaker-selling frontman to help it carve out a bigger role for itself in pop culture and become a staple of casual style.

That kind of footwear is dominated by rival Nike Inc. and its long-popular Air Jordans, but Under Armour has made serious inroads. Its footwear revenues rose 50 percent in 2016 and hit $1 billion, thanks to its running and basketball shoes. This year, the company will make 50 million pairs of shoes, Plank said.

We need to become more fashion. The consumer wants it all.

Though Under Armour hit the jackpot with Curry's sneakers, analysts are concerned that they're not getting enough traction off the court. Sneakerheads have dismissed some Curry styles as ugly in the past, and some observers are worried about the newest iteration.

In a note to clients issued earlier this month, analysts at Nomura Securities's Instinet wrote that the Autumn launch of the Curry 3 had been "muted." In their checks on the sneaker's various releases over three months, they found little fanfare and no store sellouts. Foot Locker said the Curry 3 launch had "started off a bit slower" than its predecessors. (Under Armour did not share specific sales numbers for that shoe.)

Another key piece of Under Armour's strategy is lifestyle label UAS, which debuted at New York Fashion Week in September, with former Ralph Lauren and Adidas fashion designer Tim Coppens in charge of the styles. The first collection was bold and wild, full of non-traditional athletic silhouettes and vivacious pops of colour. Some of its items were quite couture and came with correspondingly haute price tags — like a $1,500 spread-collar camouflage trench coat.

On Tuesday, Plank said the birth of UAS was a "massive stride" for Under Armour's shift toward more off-the-court clothing and shoes. But even as it invests in lifestyle wear, performance must remain infused in the items; shoppers expect both style and substance from their sportswear.

"We still see that we're not quite there with everything that we want to do," he said.

By Kim Bhasin; editor: Samantha Schulz.

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