Under Armour’s Footwear Sales Are Rising — But Nike & Adidas Are Still Winning on its Home Turf

Hilary George-Parkin

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Footwear accounts for less than a quarter of Under Armour’s sales, but it’s proving to be the brand’s fastest-growing category in 2019.

For the quarter ended June 30, footwear revenue was up 4.7% to $284 million over the prior year — a bright spot next to a sales slump of 1.1% in apparel, which comprises nearly two-thirds of the company’s total revenue.

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As analyst Erinn Murphy of Piper Jaffray pointed out on the company’s earnings call Tuesday, it was also the toughest comparison of the year, with footwear sales rising 14.5% in the second quarter of 2018, compared with flat or negative growth throughout the rest of the year.

What’s behind the upswing? Patrik Frisk, Under Armour’s president and COO, credited the expansion of the brand’s Hovr sneaker franchise, which targets runners with “zero gravity feel” cushioning and technology that tracks performance metrics and connects to a UA MapMyRun app.

“I don’t think anybody would have thought that Under Armour was going to get into the running game with such a strong point of view just a couple of years ago,” said Frisk, “but what we’re seeing is the traction, it continues.”

He highlighted the Hovr Infinite sneaker as a top seller, even at a higher-than-usual price point of $120 to $140 per pair. “It’s giving us confidence that the consumer is absolutely willing to side with Under Armour in running footwear if they have the right product and the right messaging,” said Frisk.

In a note to clients, Wedbush analyst Christopher Svezia said the brand “continues to have significant growth opportunity with footwear,” as well as in international markets, where sales were up 12% during the quarter over last year, compared with a 3% slump in North American sales.

According to some measures, though, Under Armour isn’t yet finding success in the all-important U.S. footwear market. The NPD Group’s Retail Tracking service found that sales were down in the mid-teens for the first 6 months of 2019, according to Matt Powell, senior industry adviser for sports at the market research firm.

On the call, Frisk and UA CEO Kevin Plank emphasized that the company is still in the beginning stages of implementing the five-year turnaround plan it outlined at its December investor day. Throughout the coming quarters, they said, the company will shift toward more full-price selling, more frequent drops, stronger cross-channel messaging and a new go-to-market process that will roll out for spring 2020.

Central to the turnaround plan is the brand’s key customer — “the focused performer” — though many industry experts have questioned the strategy.

“We remain skeptical of [Under Armour]’s path to recovery,” said Susquehanna Financial Group LLLP analyst Sam Poser before the company’s latest earnings. “We believe [Under Armour]’s view that fashion and performance are mutually exclusive will hinder its ability to compete with Nike, Adidas, New Balance and others for consumer mindshare and retail partner confidence.”

Meanwhile, according to Powell, “brands that are chasing performance will find sales growth challenging.”

What’s more, competitors like Nike and Adidas are winning with North American customers — the sportswear giants’ sales in the region were up 7% and 5% last quarter, respectively — Under Armour is still lagging close to home.

“In order to be able to grow at or faster than the market they’re in, it’s going to be very difficult to do that only selling performance apparel, because the part of the market that’s growing faster than the median is non-performance related,” Bryan Gildenberg, chief knowledge officer at Kantar Consulting, told FN.

Still, he said, aping Nike and Lululemon’s positioning is also likely not a wise strategy: “I think the best way to [grow] would probably be through their more traditional core audience, rather than say, trying to be the fifth best women’s athleisure brand. [UA should probably] think about how they can cascade down into to non-performancewear occasions for the audience that really loves the Under Armour performance positioning.”

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