Under Armour was a real threat to Nike. Now it's fighting to stay relevant

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NEW YORK — It was once hyped as a worthy rival to Nike. But at present, Under Armour, founded by a 23-year-old former college athlete, is struggling to "just do it."

Instead, the brand that's championed on the basketball court by Stephen Curry and on the golf course by Jordan Spieth, is now struggling — badly — to find its footing in an increasingly competitive and crowded sportwear marketplace for regular folks, where younger shoppers are more googly-eyed over newer entrants like Hoka and On running shoes.

Under Armour's annual sales have been sluggish at best for the past several years, while its stock has plunged 88% from its all-time high in 2015. Industry experts said the company is mired in an unpleasant mix of problems, which include an identity crisis, several management controversies, ignoring evolving market trends to its detriment, and a rotating carousel of CEOs in quick succession.

One of them is Kevin Plank, its founder, who is back at the helm for a second time as CEO after being replaced in 2019. Similar to Starbucks founder Howard Schultz's past returns to Starbucks and Disney chief Bob Iger's recent return as CEO, Plank aims to right the ship at Under Armour.

"When Under Armour was growing at 20% plus numbers, people saw it as a legitimate competitor to Nike," said David Swartz, senior equity analyst with research firm Morningstar, in an interview with CNN.

"It was like On or Hoka but 10 years ago. It was the upstart athletic brand that was making real inroads against Nike, the dominant name in the industry. People saw it as a company that actually could break through and take market share from Nike among the hardcore athletes," Swartz said. "That actually did happen for a while, but then that didn't last."

Plank launched Under Armour in 1996 to be what the name suggests — a protective layer of clothing worn by competitive athletes sweating it out in the heat of the game.

The first product was a fitted T-shirt called "The Shorty," made from moisture-wicking fabric for elite athletes to wear under their uniforms to keep them dry. Its iconic Under Armour intertwined "U" and "A" logo was strategically placed on the neckline, to keep it conspicuous.

The T-shirt eventually launched the brand to the masses after it quickly gained fandom among the ranks of professional athletes. The startup's fast track to success led to Under Armour going public in 2005. It's early slogan: "Protect This House."

By 2010, the business had crossed $1 billion in sales. Five years later, sales surpassed $4 billion. But then the momentum started to wane.

Protracted period of pain

The past eight years for Under Armour have been a struggle that doesn't appear to be abating.

The company on Thursday announced a restructuring of its business as its North America sales in its most recent quarter tumbled 10%. Looking ahead, the company cast a dour forecast for its current fiscal year, expecting sales to drop 15% to 17%. Layoffs will be part of the effort to right the ship but executives did not specify how many employees will lose their jobs.

Under Armour also announced a $500 million share buyback, a move to reward shareholders.

Plank told analysts during the earnings call on Thursday that he will shepherd a reset of the business that centers on selling fewer but more innovative products to meet the needs of athletes, significantly accelerating product development, refocusing on its men's apparel category and reducing discounts of its products.

"We are simply doing too much stuff. There are too many products, too many initiatives. To reconstitute this brand, we must be highly focused and prioritize what needs to get done so that our teams know exactly what to do with a clear definition of success for them," Plank said.

It can't be ignored that management issues, too, have plagued the business for years, Swartz said.

"The company has essentially had five CEOs in the past five years, if you count Kevin Plank twice," said Swartz. Plank was announced as CEO — again — in March, ending the very brief year-long tenure of Stephanie Linnartz.

Plank conceded during the analysts call Thursday that frequent C-suite turnover had become a serious impediment to success.

"With several CEOs and heads of product, marketing in North America over the past half-decade, ongoing turnover of critical leadership has been central to our inability to stay agile and decisive," he said.

String of controversies

The period from 2016 onward is when "things really started to fall apart" at Under Armour, Swartz said. A huge issue arose when an important channel of distribution for the brand went bankrupt and closed stores.

A bulk of Under Armour products are sold through sporting goods retailers and department stores, including Macy's and Kohl's, and online.

"When Sports Authority went bankrupt in 2016 it really hurt Under Armour. It was a major customer of the brand, as is Dick's Sporting Goods," Schwartz said.

In 2020, UCLA sued Under Armour for ending a $280 million sponsorship deal. The suit alleged that Under Armour was struggling before Covid-19 and that it used the pandemic as a reason to get out of the deal.

The 15-year sponsorship deal, signed in 2016, was the largest in the history of college sports at the time. In exchange for the $280 million, UCLA's student athletes and personnel would wear and use Under Armour (UA)-supplied products exclusively. The company reached a settlement with UCLA.

The following year, Under Armour paid $9 million to settle a multi-year investigation with the US Securities and Exchange Commission into its past accounting practices, according to Footwear News.

Outside of other bad press for Plank, competitors were gaining ground on Under Armour, whose high-performance sportwear offerings weren't best suited for the Lululemon-driven athleisure trend that had emerged and then dominated the way consumers dressed through the pandemic.

"Under Armour has failed to latch upon streetwear, or sports style that catapulted On or Hoka or Merrell," said Zak Stambor, senior analyst, retail and ecommerce, with market research firm eMarketer, in an interview with CNN. "It needs to figure out what is next. If it can't do that, then it needs to quickly latch upon what another brand has identified as the next big thing."

Stambor questioned Plank's decision to pull back from discounts at a time when consumers are hyper focused on value.

"It carries the risk of decreasing demand particularly when you don't have a must-have product," he said. Stambor said this decision also stands in stark contrast to a recent move that rival Adidas has made to roll out cheaper versions of their must-have shoes.

Despite it's significant challenges, Stambor said Under Armour can remain relevant in the market. "It is a very large company with huge revenue. It's not as though the brand has fully diminished in standing. It's a bit stuck," he said.

"Under Armour needs to identify what it is that consumers want and lean heavily in that direction. It hasn't fully shown an ability to do so over the past few years," he said.

One area that's going strong is the brand's long-term celebrity-brand partnerships, said Eric Smallwood, president of Apex Marketing Group, a sports and entertainment firm that evaluates sponsorships and advertising campaigns.

"Under Armour's relationship with the 'The Rock', Dwayne Johnson, has been pretty effective. They've expanded to the United Football League, which is the football league that Johnson co-owns," Smallwood said. "Their uniforms are Under Armour."

Golf is another area where the brand is making inroads while the Stephen Curry partnership has kept the brand visible in the basketball world, Smallwood said.

The basketball superstar Curry, arguably the best shooter in history, famously signed with Under Armour instead of Nike in 2013. Meanwhile, the brand's other major NBA star, Joel Embiid, quit Under Armour in 2023 a few months after he was named the league's most valuable player.

Embiid signed a shoe deal with Skechers last month. Under Armour reportedly bid hard for a shoe deal with WNBA phenom Caitlin Clark, who many expect will sign with Nike.

"The bottomline for Under Armour is for the brand to be clear about its identity," he said. "Are they a shoe company? Are they an apparel company? At one point everyone else copied their mositure-wicking undershirt. Then maybe they had an identity crisis. It's going to come down to deciding if they want to evolve into a lifestyle brand or stay in performance-based products."