Under Armour to ramp up marketing amid accounting probe, CEO change
An Under Armour store
It’s been a busy fall for Under Armour. In late October, the sportswear giant announced that Kevin Plank, who founded the brand 23 years ago, will soon step down as CEO; this past weekend, the brand divulged it is undergoing a federal accounting probe. Amid the drama of both, Under Armour reported third-quarter earnings on Monday morning and said it will ramp up brand marketing in the coming months.
On a conference call with analysts, Plank said that 2020 will be the first time in recent years that the Baltimore-based brand will have the right mix of resources and scale to fuel its brand marketing efforts.
“You’ll hear about this brand—you’ll hear us tell our story, that’s for sure,” Plank said, noting that the company is increasing its marketing spend.
The extra amplification might come in handy. On Monday, the brand exceeded analyst expectations with earnings, but lowered its full-year forecast. For the third-quarter, Under Armour reported a 1 percent decline in revenue to $1.4 billion; revenue declined 4 percent in North America to $1 billion. At $102 million, net income was up 7.2 percent over the year-earlier period. However, investors sent shares plunging—by early afternoon Monday, the stock had fallen 16 percent to trade near $16.
On Sunday, the Wall Street Journal reported that Under Armour has been under investigation by the Justice Department and Securities and Exchange Commission since 2017. The federal agencies are looking into whether the brand shifted sales reporting by quarter in order to appear more financially sound. David Bergman, Under Armour’s chief financial officer, addressed the probe on Monday’s call though he declined to go into detail.
“We firmly believe that our accounting practices and disclosures were appropriate,” he said.
It’s too soon to know if the federal investigation will have an effect on consumer perception of the brand, says Matt Powell, sports business analyst at NPD Group. However, he notes that while Under Armour is operationally in a better position than ever, with cleaner inventory and cross-category operations, it’s still dealing with a shopper who is not into performance sportswear.
“We are very much in an athleisure cycle right now, and brands focused on the performance business are finding it challenging,” he says. “It’s much harder.”
Plank intends to turn over the CEO reins to Patrik Frisk, president and chief operating officer, on Jan. 1. Plank will remain as chairman and brand chief. Plank has been on 56 quarterly earnings calls with Under Armour, he said Monday.
Next year, the brand plans to pursue a 360-degree marketing approach, according to Frisk.
“2020 it will be a coordinate play; we will go out and market ourselves across every channel and make sure we’re increasing consideration with the consumer,” he said. It’s a rallying cry Plank has been fond of making.
It’s unclear which agencies will get a piece of the larger marketing pie. In the past, Under Armour has worked with Droga5 and Giant Spoon. Yet a recent marketing push around the Curry 7 shoe with Stephen Curry was created completely in-house.
