Yesterday, I picked up some shares in Under Armour ahead of earnings. Now, that was not because I particularly believed in the company, but because the stock was beaten down enough (it’s down close to 59% off it’s last year highs) that even news that was less negative than expected would be met positively. I was right, I bought at just under $20 and right now, the stock is trading at around $21.80 so overnight I’m up about 10% or so. Well enough.
However, digging into the company’s announcements tells you that the stock, if you’re willing to ignore the noise and volatility of the next few quarters, could still be a good play. Not a convincing one, and definitely not a sure bet, ten bagger or anything like that. But good enough to take a chance on, if and that’s a pretty big if, but if you’re convinced founder and CEO Plank will do what is in the best interest of long term shareholders. And he’s the largest shareholder, so I’m willing to bet that he will.
So what exactly are the reasons I think Under Armour stands a chance? First, let us get some things straight: Under Armour can never, ever be Nike. Never. They’re just not on the same level at all. I ran a twitter poll comparing users opinions on the two brands and I think after 120 votes, Nike was leading at 89% to 11%. And that gap bears out in the market. Personally, I wouldn’t be caught dead in Under Armour shoes, although I have a few of their gym shirts. That’s by the way.
Much of the problem with the company revolve around a few things. First, marketing. Under Armour either does not know how to define and push it’s brand or, worse, it might not even know what it’s brand stands for. It’s trying to hard to be Nike, and that’s a losing battle, because if it stays in the same box with Nike, it will always come a distant second. They need to craft and push an Under Dog image. We all want to live in a world where the underdog always wins the fight. Give us that world, and let Under Armour be the secret ingredient, the stone that allows David to beat the giant. Secondly, Under Armour should sell itself as a literal armor underneath every invincible warrior, athlete, champion out there. If Nike is about motion, action and winning, let Under Armour be about strength, superlative ability and winning. No one can argue against winning. In this regard, I like their new deal with Dwayne Johnson and Misty Copeland, I hope they take it front and center in their new marketing efforts.
Third, they need to please hire proper shoe designers. Their shoes are ugly, the logo is too large and clunky on the shoes and needs to be reduced by a lot, and the shoes need to be wearable outside the gym by someone other than the most dorkiest of dorks. If Nike and Adidas have prominent logos on their shoes, please, be the guy who makes his own sleek and non-conspicuous. Be the Commes des Garcon of athletic wear. Let someone say “wait, those are Under Armours??” with positive incredulity. And after they fix those shoes, they need to build a myth and legend around NBA Star Stephen Curry. They’re wasting such a tremendous asset, at a time when he is as bankable as he’s ever going to be. They need to play him up as the anti-Lebron just as they are the anti-Nike. Bron is brash, Curry needs to be smooth. Bron is powerful but lumbering, Curry is fast and precise. And he’s not just Stephen Curry, he is the three point demon, he can sink a ball from space, he’s Jumpman. Hype this motherfucker, pleaseee.
And the bottom line of all of this is that they need to find their story telling genes, and they need to find their sexy and they need to find their cool. Make Under Armour great again.
Now, the company is aggressively investing in maximizing it’s distribution channels, working to reach customers, give them more flexibility in designing their own shoes, things that are Nike staples at this point. Those things will likely pay off. And hopefully, if they report even a slight improvement in revenues and all, they should see their stock rise from the ashes, an outcome that I would very much appreciate.
Right now, though? If they don’t make solid changes, their window will close and Nike and Adidas will beat them. I’d hate to see that happen, but I have a feeling that CEO and 16% shareholder Kevin Plank would hate it even more. Which is why I’m believing we’ll see better performance from Under Armour. I hope I’m right.
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