First Kohl’s, Now DSW: What Under Armour’s New Retail Partnerships Say About the Brand’s Future
Amid concerns surrounding its slowing growth, Under Armour has launched a series of new retail partnerships: Kohl’s Corp. kicked off early this year and DSW Inc. announced this week its own UA launch in time for the back-to-school season.
When Under Armour — which has also experienced significant stock pullback over the past year — announced its Kohl’s deal in July, whether the move would take the label down market and how it fit into the label’s overall brand strategy were among the top concerns for investors.
Now, the partnership with off-price retailer DSW has caused familiar worries to resurface — particularly for the brand’s footwear business, which is in its infancy.
“Under Armour’s footwear business is smaller and still developing so they need to be careful there,” Susquehanna Financial Group analyst Sam Poser said.
What’s more, DSW vice chairman and chief merchandising officer Debbie Ferrée said the retailer plans to collaborate with UA’s design team for several athletic styles unique to DSW — raising additional concerns.
“I would argue that athletic is not a core competency of DSW,” Poser noted. “The [results will hinge on] how Under Armour manifests itself in DSW stores and how they segment the brand [across retailers].”
After performing store checks at Kohl’s earlier this month, Poser said he found that the brand was already experiencing challenges with its segmentation of men’s and women’s apparel: “50 percent (maybe a bit more) of the styles [selling in Kohl’s] are also available at Dick’s [Sporting Goods],” he said.
Meanwhile, footwear and kids products seemed to experience less overlap. B. Riley & Co LLC analyst Jeff Van Sinderen made similar observations regarding a need to execute crafty product segmentation, noting that the brand’s need to drive volume could come at a cost.
“I think for Under Armour, it’s tough because they need to find new points of distribution,” explained Van Sinderen. “It is a bit of a double-edged sword, they need to grow, but in doing so, they may risk compromising brand image.”
Under Armour was one of the brands hit hardest by The Sports Authority’s bankruptcy last year — the brand had originally planned to bring in $163 million in revenues from Sports Authority in 2016 but ended up seeing around $43 million — and Poser said he also believed that the brands is making strategic moves to boost incremental volume and make up for lost Sports Authority business.
In that vein, planned partnerships with Shoe Carnival, Famous Footwear and others are also coming down the pipeline for the brand, Poser said.
Concerns aside, analysts seem to agree that it is likely a wait-and-see game for Under Armour’s retail partnerships — particularly when it comes to its footwear business, which has lost momentum in tandem with a slowing basketball market as well the waning popularity of superstar endorser Stephen Curry.
“Under Armour is primarily an apparel brand,” Van Sinderen said. “Footwear is a secondary category for UA and it will take them some time to get the formula right in all aspects of that business.”
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