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  • Whether it's on the football field, the basketball court or the ski slope,

  • since the early 2000s, elite athletes like Steph Curry, Tom Brady and

  • Lindsey Vonn have sported the same brand in preparation for game day:

  • Under Armour. The company says its state-of-the-art products have been

  • engineered to help athletes solve problems, and up their game.

  • If it's Under Armour, then what's to do?

  • So like that idea of innovation, everything we do, that's the DNA of the

  • brand. That's what the consumer knows when they buy Under Armour, that

  • it's something that's actually making them better.

  • So that is...that's what and who we are and that's what drives through.

  • With a roster of sports celebrities in less than two decades, Under Armour

  • grew to become one of the biggest sports apparel brands in the world,

  • alongside Nike and Adidas.

  • But the company that urged athletes to fight on together has fallen on

  • tough times. As of 2020, sales growth at under armor has slowed on its

  • home turf of North America, and its stock has fallen from its all-time

  • highs. The coronavirus pandemic has only added to the company's woes.

  • In October 2020, the company announced third quarter revenue was flat.

  • And overall 2020 revenue is expected to decline compared to 2019 results.

  • One bright spotfootwear revenue in the third quarter of 2020 increased 19

  • percent from the year prior.

  • But with COVUD-19 wary consumers spending more time at home, ditching work

  • clothes and suits for yoga pants and sweats, analysts say the latest

  • athleisure boom and a newfound interest in health and wellness could

  • propel Under Armour and its rivals for years to come.

  • What we're going to see in the post COVUD world is people wearing their

  • athleisure and their comfortable dress, whatever they deem that to be,

  • everywhere. The beauty of the space with athleisure is there's not a lot

  • of competitors. It's a growing category and it shows no signs of stopping.

  • So the question is, can Under Armour rebuild its momentum and catch the

  • athleisure wave before it's too late?

  • Or will rivals Lululemon, Nike and Adidas take over?

  • Under Armor got its start in Washington, D.C.

  • in 1996.

  • Former University of Maryland football player, Kevin Plank, wanted a

  • solution to the sweat that built up in his cotton T-shirts during

  • practice. In his grandmother's basement, using a stretchy synthetic

  • material, Plank's fledgling company engineered a shirt to wick away sweat

  • from the body, keeping athletes cool, dry and light.

  • I would say this: Under Armour was a very important brand

  • for paving the way for a huge change in how we dress, for playing sports

  • and for how we're working out.

  • If you go back before the IPO, and you go back to the 90s and the 80s,

  • effectively what people were doing to work out in, they were working out

  • in a cotton T-shirt which absorbs sweat.

  • And if it absorbs sweat, it becomes heavy.

  • And if it becomes heavy, it impacts negatively your performance, either in

  • the gym or especially on the field.

  • The company got its big break in 1999 when it was signed on to supply

  • athletic apparel in Oliver Stone's gridiron film, 'Any Given Sunday.' The

  • company only made about $40,000, but athletes everywhere took notice.

  • Within five years, Under Armour had revenue of $5 million.

  • Under Armour went public in 2005 at $13 a share.

  • And by September 2015, shares had risen to a peak closing price of $53.

  • And it was rolling out new products beyond T-shirts as well, including a

  • line of HeatGear apparel designed to be worn in hot temperatures and

  • ColdGear products engineered to maintain a body's core temperature.

  • I'd say in a year, about 2006 or so, Under Armour went public.

  • That gave, you know, renewed force to the athletic apparel craze, if you

  • will, followed thereafter by Lululemon.

  • And you know, ever since we've seen the demand for suits go down

  • and rise for casual wear go up.

  • In 2006, Under Armour went head-to-head with sneaker giant Nike, jumping in

  • to the footwear space.

  • But instead of moving directly into the competitive gym shoe market, the

  • company launched a line of football cleats, capturing 23 percent share of

  • the market in the first year and becoming the official footwear supplier

  • of the NFL. When they came out with cleats back in 2006, they came out

  • with that great ad with the 'Click Clack,' and if you were a football

  • player, you said, "Oh, that's, that's cool.

  • That's what it sounds like when I go on the field.

  • They really understand what it's like to play.

  • I'm going to go try their cleats."

  • In 2009, the brand launch a line of running shoes as well as soccer cleats.

  • By 2010, overall revenue soared to a billion dollars.

  • And in addition to selling products, the company also made a big push into

  • acquiring athletes training data.

  • In 2013, Under Armour acquired MapMyFitness for $150 million.

  • And two years later, purchased fitness tracking apps, MyFitnessPal and

  • Endomondo for a combined $560 million.

  • At the time, the company was signing contracts with some of the biggest

  • names in sports, including New England Patriots quarterback Tom Brady, and

  • Golden State Warriors Steph Curry.

  • In 2016, Under Armour and UCLA announced the biggest college sponsorship

  • deal ever: a fifteen-year, $280 million contract for footwear and apparel.

  • Though it's worth noting that amid falling sales, Under Armour announced

  • in the summer of 2020 that it wanted to end the deal just a few years into

  • the 15-year agreement.

  • By 2015, the company had a peak market cap of $22 billion.

  • But

  • even as its share price peaked, in the mid 2010s, the company was starting

  • to lose its luster and net profit was taking a hit.

  • Critics said the brand was losing its unique appeal. One of the big

  • problems with the Under Armour garments is that they're visually very

  • specific and you instantly associate them with exercise, and that doesn't

  • really engender itself to a versatility that American consumers want.

  • So that's probably...the design issue is the number one problem.

  • The downturn in retail also weighed on the brand.

  • In March 2016, big box retailer Sports Authority filed for Chapter 11

  • bankruptcy. Under Armour, reported net income in the second quarter of

  • 2016 of $6.3 million, 57 percent lower than a year earlier.

  • According to a Q2 2016 earnings call, the decline was likely caused by

  • sports authorities bankruptcy filing.

  • And the company was struggling with sales more broadly on its home turf

  • too. North American revenue in 2019, was $3.6 billion dollars, down two

  • percent from 2018.

  • And keep in mind, sales in North America are a huge part of how Under

  • Armour makes money.

  • In 2019, 69 percent of the company's overall revenue came from North

  • America. On June 1st, 2020, Under Armour's Chief Operating Officer,

  • Patrick Frisk, replaced Kevin Plank as CEO.

  • Plank moved to the company's Eexecutive Chairman and Chief of Brand slot

  • and remain involved in the larger direction of the company.

  • But the coronavirus pandemic may have impacted the company even further.

  • In May 2020, Under Armour said it was delaying payments to some of its

  • athletes as a cost-cutting measure, after first quarter sales plummeted 23

  • percent due to the coronavirus pandemic.

  • And in September 2020, Under Armour announced it would lay off about 600

  • employees globally. And the following month, the company agreed to sell

  • MyFitnessPal to a private equity firm.

  • Athleisure, the fashion trend, known for sporty gym clothes worn around the

  • home office or at the grocery store, is a roughly $80 billion business in

  • the U.S.. You know, looking into the future, you're going to see a lot of

  • athletic wear, a lot of athleisure, a lot of synthetic fibers, sorry

  • cotton industry, but that's the truth.

  • And this is the future of American fashion.

  • And people need to get on board or remember the good times they had in the

  • early 2000s. The category is dominated by a few big players, including

  • Nike, Adidas, Lululemon and of course, Under Armour.

  • According to analysts, brands offering products with a healthy dose of

  • performance and fashion are well, well-positioned in the athleisure market

  • for future growth. I'd say two things, actually.

  • It's the words function and fashion, but brands start off doing very well

  • if they show that they have functional prowess or they're much better than

  • other items of that same category that we saw it with Nike in footwear.

  • We saw it with running footwear back in the day.

  • We saw it with Lululemon, with their yoga pants.

  • We saw with under armor, with their compression shirt.

  • So it's about function first.

  • That gets you started with a great brand.

  • However, fashion is also what matters.

  • And frankly, you know, that's something that under armor has had trouble

  • with in the past. Is that fashion quotient something that Nike, Lululemon

  • and Adidas have gotten right function plus fashion.

  • Lululemon, known for its trendy yoga pants and pricey leggings, said

  • despite store closures due to the coronavirus pandemic revenue in the

  • second quarter, fiscal year 2020 increased two percent from a year earlier

  • as consumers shifted from office wear to comfier clothes, the stock closed

  • at an all time high of $398 on September 2nd, 2020, more than double than

  • what it was a year earlier.

  • And to capitalize on the country's newfound home fitness craze, the

  • retailer announced in June 2020 plans to purchase at home workout company

  • Mirror for $500 million dollars.

  • Mirror sells a $1500 high-tech mirror that streams live workout classes.

  • And while legacy athletic apparel companies like Nike and Adidas have been

  • hit hard by COVID-19, these two brands have seen a big spike in the sale

  • of apparel in the years leading up to 2019.

  • And even with the pandemic as a backdrop, Nike's stock is still on a tear.

  • One of the strongest global brands in retail, the company saw its stock

  • close at an all time high of $130 in October 2020.

  • Sales of apparel for Nike brand clothing were $11 billion dollars for the

  • fiscal year ended May 31st, 2020, almost 27 percent more than in 2015.

  • Part of the reason? Teens love Nike clothes.

  • A 2019 study found Nike to be not only teens favorite athletic apparel

  • brand in the U.S., but also the group's favorite apparel brand in general,

  • ahead of both Adidas and Lululemon.

  • And the company sees a big opportunity in women's clothing as well.

  • As of 2019, Nike's women's line represented less than 25 percent of Nike's

  • total sales. But with women flocking to comfier clothes and accessories,

  • the company thinks it can grab a larger share of the market.

  • Well, as long as there's been athletic wear, there's been this weird, and

  • sort of hard to define line between what you're wearing on the court, and

  • what you're wearing to look like you're somebody who likes to go on to the

  • court. Nike was able to successfully do it because a lot of times they

  • involved and brought on board really creative people who understood the

  • market, who understood what it was that the next generation wanted.

  • It's a similar story for Adidas.

  • The German based company had apparel net sales of around $10.5 billion in

  • 2019, 28 percent more than 2015.

  • Well, Adidas is a really interesting company because they have always been

  • very on the forefront of pushing design elements, right?

  • They are cool. They're a cool brand.

  • And, you know, that takes us back into the late 70s and 80s when you have,

  • you know, you have bands such as Run DMC adopting these, taking this

  • garment. And when you get somebody as powerful as Run DMC singing a song

  • about your clothes, like you're on the path.

  • But while Nike, Adidas and Lululemon are embracing the fashion leisure

  • trend, Under Armour said the company's focus would remain firmly on

  • athletic performance.

  • Listen. We've heard all the reads on athleisure, what that means, are you

  • in it or not? Let's be crystal clear.

  • We've identified our consumer, something we call the focus performer, and

  • that is a mindset that the consumer has.

  • And it means that when they're, when they're thinking about what they

  • wear, and what they do with Under Armour is that there's no, 'here's

  • performance and then here's athleisure.' It is all performance.

  • We say that with without beauty, there is no performance.

  • As of September 2020, Under Armour reported a net loss for nine out of the

  • last 15 quarters.

  • While Under Armour's hesitancy to fully embrace athleisure may have hurt

  • the brand's sales, recent controversies may have done even more to damage

  • the company's image long term.

  • In 2017, the company came under fire from sponsored stars after Plank

  • referred to President Donald Trump as a real asset for the country.

  • I think he's highly passionate.

  • He definitely it's you know, to have such a pro-business president is

  • something that's a real asset for this country.

  • I think people should really grab that opportunity.

  • He loves to build. I don't think there's any surprises here.

  • You know, when you look at the president, so he wants to build things.

  • We want to make bold decisions.

  • He wants to be decisive. And I'm a big fan of people that operate the

  • world of publish and iterate, you know, versus, you know, think, think,

  • think, think, think. So there's a lot that I respect there.

  • Following the interview, ballet dancer Misty Copeland wrote on Instagram

  • that she strongly disagreed with the comments.

  • Steph Curry, the face of Under Armour basketball, went on to criticize

  • Trump even more harshly.

  • And there were other troubling news reports, too.

  • In November 2018, the Wall Street Journal reported that Under Armour

  • executives and employees, including Plank, went with athletes or coworkers

  • to strip clubs on company paid visits.

  • The company told CNBC at the time of the report that it would continue to

  • address inappropriate behavior as it strives to create a respectful and

  • inclusive workplace.

  • The sportswear maker is under investigation by federal authorities too over

  • its accounting practices.

  • Under Armour said it was cooperating with federal investigators and

  • believes its accounting practices were appropriate.

  • The company was also sued by UCLA in August 2020 for breach of contract

  • after the apparel company announced it was ending its deal with the

  • university. CNBC reached out to Under Armour, but it declined our request

  • for an interview. In January 2015, Under Armour unveiled the Curry 1, the

  • first signature shoe from NBA star Steph Curry.

  • The shoe was loaded with tech, including a new cushioning system that

  • absorbed impact and converted it into a responsive burst.

  • After the launch, Under Armour's first quarter 2015 footwear revenue shot

  • up 41 percent to $161 million from the previous year.

  • And by June, Curry's Warriors were NBA champions.

  • They also did a good job, at least early on, with their Steph Curry