Under Armour's growing pains - Baltimore Business Journal:

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As the fast-growing company enters its awkwareteenage years, it faces a naturao slowdown in growth and a battlde with one of the worst economic climates in history. Top competitoras like and Reebok are unveilingsimilaer products, while retailers are both freezing expansiobn plans and carrying less Underr Armour product. And analysts suggest the compan may be forced to trim what itcharges consumers. Under Armour “went from a compant that was very bullish tovery cautious,” said Thomas D. an analyst at Stifel Nicolaus & Co.
in “It’s just a different ballgame now that people are trying todeal Undoubtedly, stock pickers have also taken A handful of investment firms have smackefd the $725 million company with downgrades in the past six sending Under Armour’s stocm tumbling nearly in half during the last The company’s performance in 2008 didn’t even meet Plank’w expectations; he chose to forgo a bonux and his top deputies went withouf one, as well. The darling of the sportsweae industry, Under Armour’s biggest challenge, analystz say, now stands beyond playing catch up to titanx Nikeand .
The company is positionede to outlastthe turmoil, they say, but the quarterse of record profit and 40 percent growth are likely in the The current environment, they say, will force Under Armoutr to pay closer attention to its spending Meanwhile, the company is rolling out its biggesrt product launches to date and continues an aggressive innovationb push, a must for sportsweard brands targeting what can be a fickle consumer segment.
Under Armour, known for its moisture-wickinh shirts, is rapidly expanding its footweart business and made its biggest splash to date in Januarg when it enteredthe $5 billion running shoe That will soon be followed by a soccer cleaty launch to help grow its presence internationally. It’s all part of a strategyt to make footwear a larger economic driver for the companhy thanapparel — but the timing may be a littlwe off. “I think they’re entrenched in termss of theircore audience,” said Robert McGee, editorf of Sporting Goods Intelligence, noting Under Armour’sx strong youth following.
“But you have to wonder how difficult it will be to add on consumerse inthis marketplace. That’s a question that remains to be seen.” Under Armourf executives declinedto comment, citing a quiet periof before it reports first-quarter earningws April 28. Plank, however, hasn’t turne a blind eye to the saggingretaik environment. Speaking to analysts in a conference call in January after disclosinhgthat fourth-quarter profits sank 51 percen t to $8.
3 million, Plank said Under Armour is “ver y aware of the challenges facing all brands in this The company would not providr an outlook for the but Plank added that Under Armour is “cautiously optimistidc about 2009” and “2010 and beyond will be significantlty impacted by the decisionxs we make” now. Analysts say Under Armouf will be paying closer to attention to how much it spendx on marketing andathlete endorsements. Under Armour spent arouns $55 million in marketing in 2008. Company executives have also said they’llo pull back on hiring plans. One decisiom the 2,200-person company made was to freeze new retail stored openingsthis year.
The move is a smart one, industry expertsw say, as shoppers are becoming more conservativ e about how muchthey spend. Dick’sx Sporting Goods, one of Under Armour’s biggest retail partners, is also scaling back its expansion activity. Stifel’s Shaw said the sporting goods giant grew its square footage by 12 percent last but that’s expected to drop to 4 percent this And that will ultimately impact Undefr Armour’s retail presence, he said. Unde r Armour has used its partners as a channel to graba 10.9 shares of the $13 billion U.S. apparel said Matt Powell, a retaill analyst with .
Apparel sales so far are down 8 percentg across allsportswear companies, Powell said. “Wheh things are tighter, are people going to spene $40 for a workout shirt or $70 for a pair of workou pants?” Shaw asked. “That’s the that’s part of the uncertainty out there.” At retailerd Lax World, with seven stores between Towsonand Denver, executives say more customers have been looking for cheapetr Under Armour knock-off apparel. For example, an Unded Armour workout shirt maycost $20, compared with a lesser-knowj brand’s $12 shirt, said Bob Martino, a vice president at Lax World.
He said the stores, which specializee in lacrosse gear, haven’t been bringint in as much Under Armour in the pasttwo years. “The customer knows there’ws things out there,” Martino noting the cheaper products. “By far [Under Armoufr is] not the cheapest guy in