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More Marketing Ahead for Under Armour After Its First Quarterly Loss

By Published on .

A scene from an ad promoting Under Armour at Kohl's, a new presence that Under Armour CEO Kevin Plank said is exceeding expectations.
A scene from an ad promoting Under Armour at Kohl's, a new presence that Under Armour CEO Kevin Plank said is exceeding expectations. Credit: Kohl's
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Under Armour is having some performance issues. The Baltimore-based sportswear company had long been on an upswing with consumers, but a challenging retail environment, along with rising competition in the too-trendy athleisure space, is taking a toll. When reporting its first-quarter earnings on Thursday, the brand listed its first-ever loss and cited weakness in North American sales.

Company executives and analysts expect that a boost in marketing in the coming months might help propel the retailer forward.

Such advertising will focus around product innovation, like Under Armour's new Threadborne performance fabric, which CEO Kevin Plank called "ridiculously soft."

"Some brands rely on their logo being cool or a good line, but what makes Under Armour unique is that every product does something," Plank said on a Thursday conference call. There's an opportunity for the brand to better tap the authenticity and equity around its athletic endorsers such as Stephen Curry, Tom Brady and Misty Copeland, he also argued. Its endorsers will use their own social media followings to tell bigger stories about the Under Armour products, he said.

Of course, analysts remain wary -- more marketing means more costs. In the first quarter, Under Armour posted a loss of $2.3 million, compared with a profit of $19.2 million a year earlier. Revenue for the quarter jumped 7% to $1.12 billion from the year-earlier quarter.

"In this environment, Under Armour has been found wanting," said Neil Saunders, managing director of GlobalData Retail, in a research note. "While we believe the brand remains innovative, we do not believe it put its best foot forward in the first part of this year with a lack of range and product innovation making it difficult to generate consumer interest."

More marketing is needed so that Under Armour remains top of mind with consumers, an investment that will "likely have an impact on costs," Saunders added.

In 2015, Under Armour, which works with creative agency Droga5, spent $344.6 million on total U.S. advertising, according to Ad Age's Datacenter. The company only spent $10.8 million on measured media in the U.S. last year, roughly half of 2015's investment, however, according to Kantar Media.

Much of the brand's problems stem from an unhealthy number of competitors. As athleisure gained ground as a trend in recent years, numerous fashion designers, like Tory Burch and Rebecca Minkoff, flocked to the space which further diluted the brand equity of heritage players such as Under Armour and Nike. Yet already some newcomers are getting squeezed out. Kit and Ace, the high-end athleisure line co-founded by Lululemon founder Chip Wilson three years ago, announced earlier this week that it will be closing all of its stores outside of Canada.

Under Armour is also dealing with more limited distribution with the loss of retailer Sports Authority. Earlier this year, it signed on with Kohl's in the biggest product introduction in the department store chain's history. Plank said that deal has exceeded his expectations to date.

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