Case Study #16: Under Armour Huddles Up to Score In the Athletic Footwear Category

Recognizing his flair for entrepreneurship by profitably selling t-shirts in college, founder and Chief Executive Officer of Under Armour, Kevin Plank, decides to take his business vision to another level. He ideates about a t-shirt that doesn’t hold the weight of moisture created by perspiration. As a football player for the University of Maryland Terrapins, he knows this technology will improve athletic performance by regulating the athlete’s body temperature on the field. His initial financial investments and countless hours of generating positive word of mouth from the athletic community pays off. Founded in 1996, Under Armour, Inc now develops, markets, and distributes performance apparel, footwear, and accessories for men, women, and youth primarily in the United States and Canada. It offers products made from moisture-wicking synthetic fabrics designed to regulate body temperature regardless of weather conditions. The company provides its products in three fit types: compression (tight fitting), fitted (athletic cut), and loose (relaxed) extending across the sporting goods, outdoor, and active lifestyle markets. Last year, Under Armour, Inc. generates $720 million in revenue and $38 million in profit, a 20% increase in revenue from 2007, but a 27% decrease in profit since 2007.

The Under Armour, Inc. operational strategy, from its product development process to retail operations to marketing touchpoints, is impressive. Under Armour is an inspiring brand, and its products are worn by everyone ranging from professional ball players to baby boomers.


Early in 2008, Plank announces that Under Armour will enter the mass footwear market, saying that the company will spend 12-13% of its marketing budget on the “The New Prototype” marketing campaign. The shoes cost between $80 and $100 (Sharrow, Ryan. “Shoe launch and ad blitz 'critical' to Under Armour growth, Plank says” Baltimore Business Journal January 2008). While the company recognizes an incremental revenue stream from the sales from its footwear line, it does so at a high cost, particularly in selling, general and administrative expenses.

Since 2004, athletic footwear consumption in the U.S. declines from 361 million pairs to 334 million pairs in 2007 (Shoe Stats 2008, American Apparel & Footwear Association). That is a 7% decrease in consumption. The consumer price index (CPI) of footwear increases from 188.9 in 2004 to 207.3 in 2007. That is a 10% increase in CPI. During periods of economic growth, inflationary pressures impact all points in the supply chain. Given a low unemployment rate during that period, customers can bear retail price increases depending on what they expect from wage increases. However, most people do not wear athletic footwear all of the time, so the replacement cycle is longer on athletic shoes than other shoes worn at a higher frequency. Other footwear categories that show decline in this category are slippers and rubber/plastic shoes (used occasionally than every day).

Perhaps the launch of the Under Armour footwear line-up isn’t timed perfectly as athletic footwear consumption is most likely lower and CPI is higher in 2008. To offset industry and economic pressures, the company deploys aggressive push marketing efforts to drive sales at the retail level. It commands strong year-end revenue for 2008, but there is erosion in profitability. A company with inspiring entrepreneurial roots and a sustainable long-term vision can evolve a strategy as it relates to future market and economic trends: “We took a fairly aggressive approach to the running footwear market in Year One and now that we are here, we have a better understanding of the things that we did right and certainly some opportunities to improve," says Plank (Walker, Andrea. “Under Armour taking new look at running shoes” Baltimore Sun July 2009). Many of the changes in the shoes will not be seen until late in 2010 or early in 2011 – Perhaps the company forecasts U.S. athletic footwear consumption to rebound at that time; Under Armour will be fully prepared to compete with a more streamlined cost structure against other athletic shoe manufacturers.

As Under Armour, Inc. huddles up to determine how to handle their game plan for their footwear lineup in 2010 and beyond, I am sure our feet will look forward to some well-designed armor as they pound against the pavement.