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No longer 'Under' the radar
There comes a point in a company's history when it clearly begins to transition from gutsy start-up to edgy competitor. That's the position that Under Armour now finds itself in, just a decade after founder Kevin Plank started the company.
All the big sports apparel makers were beaten to the punch when the company invented the moisture-wicking clothing market. But many officials at the complacent giants were likely more shocked by the fact that they have been unable to make much progress in cutting into Under Armour's share.
If you need evidence that Under Armour has great brand affinity, look at its entry onto the stock market (NASDAQ: UARM) a couple weeks ago. The shares doubled on the first day, making it the first American company to accomplish that feat in five years.
Now, UA is about to tread on the bread and butter of the Nike and Reeboks of the world. They are now getting into shoes. And Plank -- whose company took not-too-subtle shots at Nike in a recent ad -- (the Under Armour team played against a team whose colors were the exact same colors as the Oregon Ducks, the team of Nike founder Phil Knight) is not afraid to tell you how good his company's shoes are going to be.
"There has been very little innovation in cleats over time," Plank said. "The cleats that the athletes are wearing today are basically the same cleats that I wore in the mid '80s in the Pony League. We're going to do something different."
The Under Armour cleat, which will debut on June 3, 2006, will have the company's moisture wicking material inside the shoe.
"If you finish a morning practice and they're soaked, by the time you come back in the afternoon, they'll be dry again," Plank said.
Plank also said that going public won't change how Under Armour markets or produces its product. "We've been operating as if we were a public company for the last two or three years."
On Thursday, Under Armour announced a five-year shoe and apparel deal with Auburn. Under Armour will spend a total of $10.6 million throughout the life of the deal on cash, product, marketing and advertising. It's only the second school, after Plank's alma mater, the University of Maryland, that the company has signed with.
"We're not going to sign as many teams as we can and just go deep into our bank account," Plank said. "We chose Auburn right now because we think they are in a good position to win a national championship next year."
To be fair, Auburn was also ripe for the picking.
After the 2004 season, Auburn announced the school was dropping Nike because head coach Tommy Tuberville refused to oblige to the shoe company's request that players not tape up their shoes. The common practice, done to avoid ankle injuries, was hurting Nike's chance at getting exposure. This year, Auburn struck up a deal with New Balance, which promised to fit players individually and wouldn't mind the taping of the shoes.
But insiders knew that Auburn had enough success on the field to eventually get a money deal. With Reebok virtually pulled out of the collegiate game, Under Armour easily gained access to a football program that has gone 22-2 in the last two seasons.
"We will have a cleat that the players will not want to tape up," Plank said.
Shares of Under Armour closed on Thursday at $23.15.
Despite critics who say that the company should not tread into Nike territory by making shoes, Plank says that Under Armour has plenty of credibility with the sporting goods manufacturers that sell its products. Cleat allotment, he said, is already accounted for, as orders have been maxed out.
Under Armour also is expected to attack other categories. Plank wouldn't speculate on the potential of sports nutritional products with Under Armour branding on it, but he did say that football face shields made by Under Armour will be in play next year.
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