Over the past 20 years, Under Armour has carved out a niche in the activewear field by staying true to its mission to make athletes better. With sales expected to reach $5 billion this year — and a goal to grow to $7.5 billion in two years — the Baltimore-based company is the third-largest activewear brand in the world behind Nike and Adidas, and its reach has stretched beyond men’s activewear into women’s wear, footwear and most recently, high-end sportswear with an active twist. Here, Under Armour founder and chief executive officer Kevin Plank sits down with WWD editor in chief Edward Nardoza to look back on what made the brand so successful and reveal his vision for the future.
Edward Nardoza: You have one of the most dramatic success stories this industry has seen in the last 20 years. But yesterday, you reported a profit gain of 28 percent and a revenue jump of 22 percent, strong growth in footwear, and you still got whacked by the Street. Why do you think that is? Is it just the rules of the game or is it not fair?
Kevin Plank: Look, life’s not fair. We’ve been in the deep end of the pool for a long time. We’ve been a public company for 11 years and yesterday we reported our 26th consecutive quarter of 20-plus percentage topline growth. We’re only one of two companies in the S&P 500 that can make that claim and the others are tech and pharma, so doing that in the consumer space is pretty rare air and something we’re really proud of. One thing about being public for 11 years is we’ve learned a lot of lessons. You have to do what you say you’re going to do. Look, I enjoy being a public company, we gave a current outlook of less than $5 billion in revenue this year and we reaffirmed the fact that by 2018, we’ll grow to a $7.5 billion brand. This doesn’t come cheap. Our industry is very competitive with a lot of really good established players and the ones we compete against are 46 and 62 years old, respectively. This year, Under Armour turned 20 and we’re still building a lot of infrastructure, process, systems and our team. Today, we’re the number-three global brand in the world. Twenty years ago, we got dropped into a snake pit and there were probably 25 or 30 other snakes and here we are, the third-largest in the world. Yesterday, one of my largest customers, Ed Stack of Dick’s Sporting Goods, sent me a text, the same one he sent me about seven years ago when our stock got hit after an earnings call. It was very simple and short. It said: “Kevin, some days you’ll find you’re the bug and some days you’ll find you’re the windshield.”
E.N.: How do you maintain authenticity and still grow in the lifestyle space?
K.P.: Ben Pruess, who is running our UA Sportswear division, is a brilliant guy who came from one of our chief competitors and built the [Adidas] Originals business into a multibillion-dollar brand. We have authenticity and credibility on field and we can all sit here and debate how long women’s tight-fitting spandex pants can be accepted, so we’re not banking on that. But we’re going through one of the biggest shifts in the way consumers dress — on a professional basis especially. So we see a mass opportunity for product that looks great and is stylish. But what makes us authentic and relevant is that our product actually does something. I attended the Super Show in Atlanta in 1997 — there were 13,000 booths and I remember sitting in my 10-by-10-foot booth. I looked around at all these companies trying to be brands just like us, and thinking, “Why are we going to win and they won’t?” It comes down to the human, the entrepreneur, the team, but also the differentiation of your product. What made Under Armour is not a fancy slogan. We spent our first five years convincing people our name was not Armour All or underarm. As we developed, it was the DNA of our product [that set us apart]: it kept you light, it kept you cool and was better than these soaking-wet gray cotton T-shirts. These snug, tight-fitting shirts that were essentially women’s underwear are what we put on athletes in the early days. But when you put your hand in your T-shirt drawer, there was nothing else that felt like it. And more important, it performed differently. As we move to this next chapter of authenticity — sportswear — what we did with UAS is put a flag really far out in the ground. How do you make a great travel blazer or khaki pant that you can spill on and it wipes right off? If we had our druthers, the Under Armour vision would be to put dry cleaners out of business with great, stylish, beautiful product that is wearable and workable and that’s beyond ambitious. Lifestyle is something our two chief competitors consider roughly a third of their businesses, so around $15 billion in revenue. We think lifestyle sportswear is a massive opportunity for our brand and we’ll continue to press this trend for ath-leisure and it’s our job to lead.
E.N.: Was that the rationale for the collection?
K.P.: UAS is really about fashion and being premium and the idea for that is to set the tempo of where we think the edges can be. We see this massive opportunity in lifestyle and thought we should do something bold and aggressive. It’s a very small allocation, which is what it should be, but it positions us for 2017. And what any one of us in product knows is that version two is always better than version one, so you’ll get that constant kind of innovation from us.
E.N.: What kind of a hit was the Sports Authority bankruptcy and how do you make up that business?
K.P.: We’re constantly trying to open the aperture of the brand and how people see us. In sporting goods as a whole, from 2008-09 to the end of 2015, there were fewer than three companies that bankrupted with a total of $170 million in revenues — and we were doing a fraction of that with them. But in just the last 12 months, we’ve had three additional bankruptcies that accounted for close to $4 billion in revenue in our industry. One of the lessons you learn is you never bet the whole company on any one partner. Five or six years ago, Dick’s would have been 20 percent of our business, but it’ll be roughly less than 10 percent this year. We all have to be constantly ready to deal with the changing landscape of our account base, our consumer base and how we deal with them. The dollars are still available, you just have to be more clever in how you’re going to find those dollars again.
E.N.: How about the importance of your own stores versus wholesale?
K.P.: In 2019, we’ll be moving into what we think is the definition of “flagship.” We’ve taken the old FAO Schwarz space — it’ll be 50,000 square feet and our vision is to build the greatest retail store in the world. The ambition we have is large and we think we can do something pretty dynamic. It’ll be the heart and soul of a physical experience that will involve digital, media and how the consumer wants to transact with us.
E.N.: Do you think “dual brain”: there’s physical retail and digital or is it one organic whole?
K.P.: The reason we’re doing that store is to put a flag out there for our product team. We still make shirts and shoes the same way we did 100 years ago. Think about how slow our industry has been. It takes 300 sets of hands to make a single pair of athletic shoes. It means we’re chasing labor all over the world. What are we going to do if Apple and Samsung decide they’re going to start making T-shirts and shoes? And if they did do it, what would it look like? Let’s not get caught flat-footed. Let’s do it before them. When I walk into an Apple store, it’s easy. I get my digital life solved. And so the aspiration we have for our brand is, “how do we solve your physical life?” The most important aspect in all our lives we know the least about: our personal health and fitness. I don’t think anyone has cracked this code yet and it’s an opportunity for us that led to our acquisition of several apps. We have over 190 million registered users on our four apps. I don’t think wearables are the only answer, but measuring is incredibly important. I think there’s a role to [know] your physical self better and do it in a stylish and beautiful way.
E.N.: Talk a little bit about your Innovation Lab in Baltimore.
K.P.: Four years ago, we ran out of space in our current headquarters. I personally decided we needed a bigger house, so I began buying real estate and through 14 transactions and 47 parcels of land, we were able to assemble 266 acres right under I-95. We’re going to anchor with a 50-acre Under Armour campus. [Part of that includes] the Under Armour Lighthouse that is 70,000 square feet with an innovation center. We’re effectively going to grow our business by 50 percent over the next few years and of the 150,000 new jobs we’ll generate, how many of them are pegged to come back to the United States, [even though] 85 percent of our business is being done in North America? Effectively zero. How can we not bring 100, 1,000, 10,000 jobs to a hard-working, blue-collar city like Baltimore? We just received $600 million in tax incentive and financing from the city to build the public infrastructure. We think we can build a new front porch for Baltimore. The expectation that consumers are going to have [in the future] is so much higher than it is today. Shareholder value will not be the only metric. I believe we’re all going to have some requirement to make the world a better place. I want to build the biggest, baddest brand on the planet — that’s the ambition we have. But in doing it, there’s also the ability to make our city a part of that.
E.N.: Did you read Phil Knight’s book, “Shoe Dog,” that came out last year?
K.P.: No. I read the unauthorized one, “Swoosh,” in 1996. I took notes the whole time. The reason it was unauthorized is that their founder said he didn’t want to give anybody else the blueprint for how to build a company. I think if there’s one person in the world they wouldn’t want reading that book, I’m that person. Because of the book, I was inspired, so every year I used to write a holiday card to the founder of our chief competitor. “Dear Mr. Knight, you don’t know who we are, but you will someday.” I didn’t think they got there, but I did it out of spirit. Then in 2007 or so, he said somewhere that he got the cards and they pissed him off.