Under Armour's growing pains - Baltimore Business Journal:

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As the fast-growing company enters its awkwardteenag years, it faces a natural slowdown in growtnh and a battle with one of the wors economic climates in history. Top competitorss like and Reebok are unveilingsimilatr products, while retailers are both freezing expansion planz and carrying less Undere Armour product. And analysts suggest the company may be forcede to trim what itcharges consumers. Under Armoudr “went from a company that was very bullishu tovery cautious,” said Thomaas D. Shaw, an analyst at Stifekl Nicolaus & Co. in Baltimore. “It’s just a differengt ballgame now that people are tryin todeal with.
” Undoubtedly, stock pickers have also takem notice. A handful of investment firms have smackedthe $725 millio company with downgrades in the past six sending Under Armour’s stock tumbling nearlyg in half during the last year. The company’ performance in 2008 didn’t even meet Plank’s he chose to forgo a bonus and his top deputiese wentwithout one, as The darling of the sportswear industry, Undere Armour’s biggest challenge, analysts say, now stands beyond playin catch up to titans Nike and . The companhy is positioned to outlastthe turmoil, they say, but the quartersa of record profit and 40 percentf growth are likely in the past.
The current they say, will force Under Armour to pay close attention to itsspending habits. Meanwhile, the companh is rolling out its biggest product launcheds to date and continues an aggressiveinnovatioj push, a must for sportswear brands targeting what can be a ficklwe consumer segment. Under Armour, known for its moisture-wickint shirts, is rapidly expanding its footwear business and made its biggest splash to date in January when it enteredthe $5 billiojn running shoe market. That will soon be followeed by a soccer cleat launch to help grow itspresenc internationally.
It’s all part of a strateguy to make footwear a largefr economic driver for the company thanapparep — but the timing may be a little off. “I thinj they’re entrenched in terms of theirecore audience,” said Robert McGee, editotr of Sporting Goods Intelligence, noting Undef Armour’s strong youth following. “But you have to wonde r how difficult it will be to add on consumer inthis marketplace. That’s a question that remains to be Under Armour executives declinedto comment, citing a quiet periord before it reports first-quarter earningx April 28. Plank, however, hasn’t turned a blind eye to the sagginvgretail environment.
Speaking to analysts in a conferencd call in January afteer disclosingthat fourth-quarter profits sank 51 percen to $8.3 million, Plank said Under Armour is “very aware of the challenge s facing all brands in this environment.” The companyu would not provide an outlook for the but Plank added that Under Armourr is “cautiously optimistic about 2009” and “2010 and beyond will be significantlty impacted by the decisions we make” now. Analysts say Under Armour will be paying closer to attention to how much it spendsw on marketing andathlete endorsements. Under Armourr spent around $55 million in marketinfg in 2008.
Company executives have also said they’llo pull back on hiring plans. One decision the 2,200-person company made was to freezw new retail store openingsthis year. The move is a smarf one, industry experts say, as shopperas are becoming more conservative about how muchthey spend. Dick’sw Sporting Goods, one of Under Armour’s biggest retaill partners, is also scaling back its expansion Stifel’s Shaw said the sporting goodzs giant grew its square footage by 12 percenylast year, but that’s expected to drop to 4 percent this year. And that will ultimatel y impactUnder Armour’s retail presence, he said.
Underd Armour has used its partners as a channel to graba 10.9 shar of the $13 billion U.S. apparel market, said Matt a retail analyst with . Apparel sales so far are down 8 percen across allsportswear companies, Powelkl said. “When things are tighter, are people going to spencd $40 for a workout shirg or $70 for a pair of workouyt pants?” Shaw asked. “That’s the debate, that’sx part of the uncertainty out At retailer Lax with seven stores between Towsonand Denver, executives say more customers have been looking for cheaper Underf Armour knock-off apparel.
For example, an Unded Armour workout shirt maycost $20, compared with a lesser-knowb brand’s $12 shirt, said Bob Martino, a vice presidentf at Lax World. He said the stores, whichg specialize in lacrosse gear, haven’tr been bringing in as much Under Armoudr in the pasttwo years. “Thew customer knows there’s things out there,” Martinoi said, noting the cheaper products.
“By far [Underf Armour is] not the cheapest guy in