[Applause]
hello everyone welcome back to case
studies with the biz doc and this week
it’s Under Armour I’m gonna take you
through three things one a short history
of the company how did they get from
where they started I’m not gonna spend a
lot of time on that
second is what has gone on right now
what I call the decade of growth and
then the three years of hell and the
third thing we’ll get through is what is
going on right now and where do they
need to go in the future so let’s go to
the board and start with the history we
first once upon a time Kevin Plank is in
Baltimore and he basically had an
experience with wet t-shirts sweaty
t-shirts and he was really trying to
find a better way to do it and he loved
the way compression shorts fit and he
was thinking why don’t we find some of
this material and make kind of this you
know kind of a compression t-shirt that
would keep the the sweat off me and
would be really innovative and a way he
went and he did that in 1996 and in 1996
the total sales was 17,000 dollars but
that’s respectable and he got the
company off the ground the next over the
next 24 months he was able to get it
moving a little bit and he wasn’t paying
himself so he was really putting every
penny he could into the business he got
his first college deal and he was a
ex-college athlete himself had friends
who were college athletes of course and
so when they were able to disgorge or
gatech I believe it was Georgia Tech it
was really exciting for the young
company well shortly thereafter they
also were able to score opportunity with
the NFL Europe and what was interesting
is they were at $100,000 in 1997 in
revenue when they got that Georgia Tech
deal and then the NFL Europe it was
three hundred ninety four thousand so
they had a respectable company the
following year something magical would
happen they got a phone call from
Hollywood and there was some talk back
and forth they were looking for sports
apparel and they were able to get their
product into any given Sunday remember
the Al Pacino was the coach in this
amazing football movie well there they
have a million dollars in sales off of
sales and recognition that came out of
that movie any given Sunday and you
can’t buy that kind of marketing so here
they’re doing really good work making
this apparel at a compression fabric
fabric that compression shorts were made
out of keeping the sweat off of you
calling it Under Armour instead of
underwear it’s armor for your body
underneath your your workout your your
your pads and your Jersey and here they
were off and running then it’s amazing
sales go up 5x from 1999 to 2000 as one
at a time they got all sports leagues in
America to actually make them an
authorized supplier and they were off
and running and from 2000 to 2001 they
went from five to twenty eight million
dollars and you can see they really have
momentum from toe to o2 suddenly it was
up to fifty million then they added
Under Armour women in oh three and that
was their first time crossing a hundred
million dollars in sales and if you take
a look at that that was you know seven
years that it took them to do that so
this is really the story of entrepreneur
Kevin Plank had a dream for the fabric
came out of need and understanding the
client himself being an athlete and it
wasn’t an overnight success he was
sitting there working seven years to get
it here so many people say wow this this
100 million dollar company was built
overnight
nope it’s another one of those great
entrepreneurial stories as he was
working his butt off you know 80 hour
weeks to make a hundred million dollar
company so he was working seven years to
make himself an overnight success
nonetheless it was the first ad came out
and they doubled the sales from oh three
204 to two hundred million dollars and
you may remember the original ad was
protect this house the house of my body
were an under armour these garments were
protecting this house and it was a
double entendre with the team protect
our house it was really well put
together great marketing so here they
are no four and they’re at two hundred
million dollar
and then in o5 they say we’re gonna add
golf to the lineup and then boom an IPO
so here you are roughly ten years after
they started after a decade of working
hard and building up to now a 281
million dollar revenue company they were
off and running and it was time to go to
Wall Street with the IPO so let me turn
around this way this would start what I
call the decade of growth and during the
IPO they raised about a hundred and
fifty seven million so that was in their
bank account after the IPO and now the
shares are traded on the market you’ve
got a value for the company that’s there
but a way they went from oh five six
seven
they go from children eighty one to four
hundred thirty one to six hundred
million dollars so you see the growth is
going but you can see that the stock
market was getting used to them the
stock market wants to see profits they
want to see things like that and in
eight it was only thirty eight million
dollars of net income on seven hundred
and twenty five million dollars of
revenue and you can see this line is the
stock price line adjusted for stock
splits and things like that for those
either more technical and reviewed it
this is the adjusted for split line and
yes they went from Oh 8 209 you know
that net income went to 46 and then to
68 and they had crossed a billion
dollars in sales in 2010 so if you look
at this the first five years they were
public they had little they had a roll
up and then they had a dip down and then
they started coming up and and reached a
billion dollars but now watch what’s
happening with net income their net
income in 2011 ninety six million
dollars was almost a hundred million
dollars of profits coming out of a 1.5
billion dollar company because they also
Chris you know a billion right there in
2010 and watch this orange line as we
continue you have one point eight three
billion in sales and twelve hundred and
twenty eight million in net income 2.3
billion so it took them you know from 96
to 2000 and
1014 years to make their first billion
and 24 months later won’t bump they had
crossed their second billion in revenue
phenomenal stuff and they were over at
162 million and in that income in 2014
they turned in three billion dollars in
revenue and two hundred million dollars
of net income and you can see now what’s
going on they are off and running as we
get to 2014 they made some acquisitions
acquisitions of consequences good
consequences bad consequences there’s a
consequence with every act you take or
act you don’t take and the act they took
here is they went and they purchased
some companies MapMyFitness
they bought this right at the end of 13
and paid a hundred and fifty million
dollars for it then MyFitnessPal they
closed that at the beginning of 15 for
475 million and endomondo it closed that
in beginning of 2015
485 million all of this done a little
bit before 14 and at the beginning of 15
added up to 700 million dollars well
where did that money come from well some
of it came out of their profits but
let’s take a look here these pink
numbers up here is the amount of debt
that the company had it had a hundred
million dollars in debt in 14 that grew
to 300 million in 15 seven hundred
million in 16 and 1 billion in 17 and we
can see what’s happening to the stock
price so keep that debt in mind right
now and all and these acquisitions that
they made for companies that were going
to help you you know incorporate into
the underarmor bran or into the Under
Armour of Footwear running shoes things
you could track your fitness and take
advantage of apps that were on the
market and do things like that so it
wasn’t lying with the market and in line
with what Nike and others were doing but
it came at a price I mean it was 700
million dollars to acquire these
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get back to the case study anyway in
2015 they crossed four billion dollars
in sales
but 233 million in profit in other words
they did another billion in revenue but
they only added another 25 million
dollars in net income at the bottom well
the market started reacting to this in
2016 they were up to 4.8 billion and
look at this for the first time their
net income goes down from 233 to 198
uh-oh then four point nine billion
dollars in revenue in 17 – that’s a
negative – 48 million dollars yes the
debt was over a billion dollars in 2017
going from a hundred million dollars to
a billion that’s a 10x run-up in debt
over these years at a time or your net
incomes going there which causes your
stock to look like a roller coaster and
there’s only one word for this and that
is damn man that is a perfect storm of
trouble the decade of growth was
officially over and those of you have
been paying attention you’ll have seen
right around early 16 and the the volume
really got turned up on this – mid 16
people were saying okay the run is over
for Under Armor the run is over as a
couple things happen back in 13 they
signed two super athletes they signed
jordan Spieth in golf but they also
signed Seth Curry the Golden State
Warriors and they were now competing
with the big boys for these big
celebrity at
endorsement deals and both of those
deals were mammoth deals as they get
over here you can see they’ve got those
deals costs money
affecting net income and the debt you
got to pay interest on that affecting
net income and you can see they were
absolutely punished there’s been a
little roll up here at the beginning of
2018 that I’ll talk about in a minute
but you can see the market was very
upset and there it went so now let’s
take a look at some things that happen
to them and I’m going to talk about
lessons in a minute that matter for you
and me so we’ve covered the history I’ve
taken you through the decade of growth
and now let’s talk about the things that
happened here first of all Sports
Authority goes bankrupt Sports Authority
we know they were like Dick’s Sporting
Goods giant stores with everything in
there from golf to tennis to baseball
for your kids everything was in there
and a what they called a big box
retailer they went down and they were
generating 2.4 billion dollars of
revenue well where was that 2.4 billion
dollars going what was going to Nike to
adidas to Under Armour and also we have
the end of 2016 which was the u.s.
presidential election now I don’t want
to get into politics here but I’m just
gonna say what happened I’m I’m not
taking sides but Kevin Plank went out
and this is what he did he basically
announced that he supported some things
that the new President Trump was doing
some of those things a lot of people
were not pleased with like you know
controlled immigration closing borders
there’s a lot of things that we all rat
reacted to well and I’m not going to
judge it one way or the other
but if you are a CEO of a public company
there is a reality about politics you
can get behind a cause like you know
global warming or something like that
but as we know half of the market feels
this way half of the market feels that
way and if you’re trying to sell Under
Armor Church and footwear to everybody
you need to step back because if you’re
on the stock market one of your duties
is a CEO and many of you may disagree
with this but your duty as a CEO it’s a
return for the sheriff
elders plural shareholders and some of
them be liberals some of them be
conservative someone being Green Party
some of them be moderate in the middle
and not care about politics the fact is
they’re all your shareholders and you
have a duty to give a return to all the
shareholders so you need to tread
carefully and companies like Starbucks
have said things very boldly and had
protests and boycotts there’s a lot of
places out there where you have to be
ready for the fire if you take a stance
and in this case plank decided that he
was going to support the new president
and also he got involved in the Business
Council well the more things happen that
were controversial that cap brought a
big spotlight on the people that were
part of the presidential Council one of
those was curry so all these are not
bullet points these are negatives so the
whole political thing regardless of how
you feel about it became a negative for
Under Armor and he ultimately took out a
full-page ad and says hey let me explain
what I mean and curry had tweeted and
said I’m wearing Under Armour shoes but
I’m really not on board with the CEO
that’s horrible you’re paying curry all
this money to be you know this icon for
your shoes and suddenly many people in
the NBA the players are like hey I don’t
like what Under Armour saying had the
opposite effect and that was bad what
was also negative is they made a move to
add coals and to start selling their
garments and their Footwear through
coals and people thought that coals was
down market on brand perception and
Dick’s Sporting Goods got a little upset
because if you’ve read Dick’s Sporting
Goods bought what was left of Sports
Authority so you would have thought that
Under Armour would have doubled down on
Dick’s Sporting Goods and said hey
Sports Authority is gone you’re gonna
get all that sales and revenue let’s
double down on what we’re doing together
well Dick’s was a little annoyed with
what happened at Kohl’s so that ended up
being a negative then there was a report
that came out from Piper Jaffray and
Piper Jaffray did this very detailed
report on youth and brands the Piper
Jaffray survey was terrible for
Under Armor first it indicated that
teens were backing away from the
underarmor brand and they didn’t see it
as hip second when it got down to the
survey about shoes they had dropped from
number fourteen in terms of brand
preference to number twenty-four and
they scored number one on the following
question can you tell us what brand
you’re no longer wearing Under Armour
came out number one
all of this was terrible at a time were
65% of Nikes revenue was shoes 20% of
Under Armour’s revenues shoes and they
were trying to come up and at the time
they’re trying to come up Steph Curry is
annoyed with what the political
statements were and the youth in America
were suddenly saying I don’t know if I
want to wear that brand there was also a
quote from NBA star Kevin Durant that
says everybody knows that none of the
ballers want to wear Under Armour and he
turned down Under Armour at the last
minute and took a much fatter contract
with one of the big – you know Nike and
Adidas that were scoring all the
athletes so the worst of all possible
worlds was happening for Under Armour in
terms of teen preference for the brand
they had the amount how hip they felt
the brand was and this was hard data
that was coming out so you’ve got all
this things are coming at the time where
their debt is over at a billion and
their net income is here they lose a key
distributor all of this was coming
together so what they do about it well
early this year Kevin Plank was out
there on Business News talking about
where they’re gonna be going he was
interviewed by Jim Cramer on Mad Money
and he said we did three major things in
2017 we upgraded our systems we
implemented a massive back-office system
s AP so we’re never going to have to do
that again and we have the scale that a
great company needs we also changed our
structures so we went from having a head
of apparel and a head of footwear and a
head of accessories to having categories
like a head of running a head of
training and had a basketball when I
listen to that I hear some things I say
wait a minute
so you’re restructuring inside a company
you’re already a four billion dollar
company and after you crash like this
and you have these issues you’re almost
five billion dollars in sales and you
got work to do and what you’re saying is
you have to you’ve implemented s AP
back-office system and you’ve hired some
executives to be head of the basic
sports categories this seems that that
is in inside things that you should have
been doing all the way
why weren’t you thinking about that when
you were a two and three billion dollar
company seems to be that that you know
pointing at that backs away from you’ve
got all this team perception about how
hip your brand is that’s related to your
brand and your product that’s related to
product and marketing so it would seem
to me that when I listen to those things
I’m like where is marketing where’s
brand so okay you’re gonna do some of
that because you’re you’re going
international and building up your
international business but it seems to
me that some of this you needs to be
coming forward as things that you’re
doing all along and there were a couple
other things they were released at the
end of seventeen they said that the
curry for sneaker had supply chain
issues they were trying to get the right
mix of product and trying to get them
built and into the market well that’s no
good if you’re having trouble like
making sneakers also there was a war
between Nike and Adidas adidas had been
kicking Nikes butt in a lot of areas
especially related to Olympic sports and
as we know 2018 was an Olympic year
Winter Olympic year and Nike was
investing in building and product and
doing a lot of things to fight back so
you had adidas crushing Nike in certain
segments Nike trying to fight back and
as they fought themselves Under Armour
that was a challenger suddenly is
getting pushed down and that’s what’s
going on and so what you have here is an
opportunity to focus on the brand that
is Under Armour do you remember in 2006
the NFL ad click-clack click-clack it
was the cleats coming down the the
concrete going toward the the playing
field and it says you can run with us or
you can run from us and it was just an
amazing thing this was this brash young
differentiated challenger brand that was
featured in a movie that had the hip new
shirts that word had technology in them
in terms of the kind of
they were all of that has now been
copied and your brand coolness is being
seen as diminishing in its glow and
value so there you have it you’re
sitting here with all this going on and
in the beginning of 18 you announced a
data breach on some of your running and
fitness tracking so it’s like great now
you’re one of the many companies that’s
dealing with data breaches so when I
look at all this and I say them saying
that the bright spots are gonna be they
get Kohl’s international and systems I
look at the brand I look at the product
and I hear a CEO saying hey man we got
this we’re gonna be ok there’s gonna be
a tough chapter one of his others
interviews he said this he told the
street we’re getting incrementally
better every single day and we’re
feeling that right now we’re not
declaring victory and we’re not waving
flags at this point it’s a journey but
we feel good about it in a nutshell our
brand is very strong and this is the
early innings of global growth we just
need to build a great company and if you
build a great company Wall Street will
get everything it’s looking for wait a
minute I didn’t hear anything about
product I didn’t hear anything about
marketing did you I heard an indecisive
CEO trying to say everything’s going to
be ok and we’ve got this and I think the
future for Under Armour lies in one area
product that buffeted by marketing the
brand has to be glossed to bring back
for what it meant as the Challenger and
the cool brand and the products have to
follow so now let’s go to lessons for
you and me it doesn’t matter how big of
a company were growing is I like to say
if you’re running a t-shirt company in
Berlin or you’re running a jelly company
in Belarus it doesn’t matter there are
some lessons here in Under Armour for
that just average entrepreneur like you
and make first of all now what or then
what with product yuccas Peschel e
fashion products you constantly have to
be saying then what hey we got the shoe
and it’s being adopted then what then
what then what because everybody wants
to copy you and I’m not talking about
overseas copying and counterfeiting I’m
talking about people
or watching in fashion the profit is too
high the opportunity is too great and
they will be watching an underarm finds
itself in a situation here saying now
what if you find yourself saying now
what because you’re reacting that is a
sign that you have missed a step in the
market development the market got ahead
of you or competitors past you you
always have to wake up every morning
saying then what we’re doing this today
then what we’re doing that today then
what you need to be in execute and then
what mode staying ahead of market curves
and changing tastes not caught out by a
competitor Shoop called the fast
follower that passes you by where you’re
now trapped with oh now what because
you’re in reaction mode the second
lesson is you can get fully consumed by
the inside such as operations but the
outside is everything product
distribution and sales and this is what
I was referencing when I was talking
about everything here and listen to what
the CEO is saying he’s talking about si
P and and you know systems and hiring
executives that’s the inside you can get
consumed by the inside especially at a
time of crisis but you got to stay on
the outside if you’ve got trouble in
your company you need to pend on that
CEO oh and you’d say you’re the inside
guy and I’m the CEO and I’m taking sales
product and marketing and we’re going to
the outside and we’re gonna make sure
that we are in the face of customers and
we were looking at real customer data
and we’re making up our mind about how
we’re gonna make the product better and
more hip and return it to prominence
because if you’re worrying about all the
inside and you’re sitting there telling
Jim Cramer oh we have this back-office
software system from sa P that’s
wonderful great software but that’s not
what I want to see Kevin Plank on TV
talking about I want to see him talking
about we’re gonna win the hearts of the
NBA players with our next product you
will not believe what we’re gonna do for
the runner with our next product it may
be a niche but watch what we do in golf
and it’s going to be featured with
Jordan speith marketing product hip
that’s what it’s going to be and I think
that in this case there’s a perfect
example of Kevin Plank right now is
caught on the inside reacting managing
his debt
doing all these things like this rather
than being that guy that was on the
outside that was going to Georgia Tech
and making a first deal for these
unbelievable shirts that work is good
for your upper body as compression
shorts were working for your lower body
and it’s called Under Armour and I’m
gonna show you what it is and what we’re
all about that is the guy he needs to be
now on the outside and that my friends
is the Under Armour case study there are
more details on this product on that
product and some of you may feel
strongly about this shoe or that shoe is
being a contributing factor but when you
step back from it this line is the case
study of Under Armour from the decade of
growth to the 36 months of hell they’re
enduring now thank you for watching and
remember we’re on a mission to get to a
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you so much for watching and until next
time I’m Tom Miller with the biz doc and I hope I left you better than I found
hello everyone welcome back to case
studies with the biz doc and this week
it’s Under Armour I’m gonna take you
through three things one a short history
of the company how did they get from
where they started I’m not gonna spend a
lot of time on that
second is what has gone on right now
what I call the decade of growth and
then the three years of hell and the
third thing we’ll get through is what is
going on right now and where do they
need to go in the future so let’s go to
the board and start with the history we
first once upon a time Kevin Plank is in
Baltimore and he basically had an
experience with wet t-shirts sweaty
t-shirts and he was really trying to
find a better way to do it and he loved
the way compression shorts fit and he
was thinking why don’t we find some of
this material and make kind of this you
know kind of a compression t-shirt that
would keep the the sweat off me and
would be really innovative and a way he
went and he did that in 1996 and in 1996
the total sales was 17,000 dollars but
that’s respectable and he got the
company off the ground the next over the
next 24 months he was able to get it
moving a little bit and he wasn’t paying
himself so he was really putting every
penny he could into the business he got
his first college deal and he was a
ex-college athlete himself had friends
who were college athletes of course and
so when they were able to disgorge or
gatech I believe it was Georgia Tech it
was really exciting for the young
company well shortly thereafter they
also were able to score opportunity with
the NFL Europe and what was interesting
is they were at $100,000 in 1997 in
revenue when they got that Georgia Tech
deal and then the NFL Europe it was
three hundred ninety four thousand so
they had a respectable company the
following year something magical would
happen they got a phone call from
Hollywood and there was some talk back
and forth they were looking for sports
apparel and they were able to get their
product into any given Sunday remember
the Al Pacino was the coach in this
amazing football movie well there they
have a million dollars in sales off of
sales and recognition that came out of
that movie any given Sunday and you
can’t buy that kind of marketing so here
they’re doing really good work making
this apparel at a compression fabric
fabric that compression shorts were made
out of keeping the sweat off of you
calling it Under Armour instead of
underwear it’s armor for your body
underneath your your workout your your
your pads and your Jersey and here they
were off and running then it’s amazing
sales go up 5x from 1999 to 2000 as one
at a time they got all sports leagues in
America to actually make them an
authorized supplier and they were off
and running and from 2000 to 2001 they
went from five to twenty eight million
dollars and you can see they really have
momentum from toe to o2 suddenly it was
up to fifty million then they added
Under Armour women in oh three and that
was their first time crossing a hundred
million dollars in sales and if you take
a look at that that was you know seven
years that it took them to do that so
this is really the story of entrepreneur
Kevin Plank had a dream for the fabric
came out of need and understanding the
client himself being an athlete and it
wasn’t an overnight success he was
sitting there working seven years to get
it here so many people say wow this this
100 million dollar company was built
overnight
nope it’s another one of those great
entrepreneurial stories as he was
working his butt off you know 80 hour
weeks to make a hundred million dollar
company so he was working seven years to
make himself an overnight success
nonetheless it was the first ad came out
and they doubled the sales from oh three
204 to two hundred million dollars and
you may remember the original ad was
protect this house the house of my body
were an under armour these garments were
protecting this house and it was a
double entendre with the team protect
our house it was really well put
together great marketing so here they
are no four and they’re at two hundred
million dollar
and then in o5 they say we’re gonna add
golf to the lineup and then boom an IPO
so here you are roughly ten years after
they started after a decade of working
hard and building up to now a 281
million dollar revenue company they were
off and running and it was time to go to
Wall Street with the IPO so let me turn
around this way this would start what I
call the decade of growth and during the
IPO they raised about a hundred and
fifty seven million so that was in their
bank account after the IPO and now the
shares are traded on the market you’ve
got a value for the company that’s there
but a way they went from oh five six
seven
they go from children eighty one to four
hundred thirty one to six hundred
million dollars so you see the growth is
going but you can see that the stock
market was getting used to them the
stock market wants to see profits they
want to see things like that and in
eight it was only thirty eight million
dollars of net income on seven hundred
and twenty five million dollars of
revenue and you can see this line is the
stock price line adjusted for stock
splits and things like that for those
either more technical and reviewed it
this is the adjusted for split line and
yes they went from Oh 8 209 you know
that net income went to 46 and then to
68 and they had crossed a billion
dollars in sales in 2010 so if you look
at this the first five years they were
public they had little they had a roll
up and then they had a dip down and then
they started coming up and and reached a
billion dollars but now watch what’s
happening with net income their net
income in 2011 ninety six million
dollars was almost a hundred million
dollars of profits coming out of a 1.5
billion dollar company because they also
Chris you know a billion right there in
2010 and watch this orange line as we
continue you have one point eight three
billion in sales and twelve hundred and
twenty eight million in net income 2.3
billion so it took them you know from 96
to 2000 and
1014 years to make their first billion
and 24 months later won’t bump they had
crossed their second billion in revenue
phenomenal stuff and they were over at
162 million and in that income in 2014
they turned in three billion dollars in
revenue and two hundred million dollars
of net income and you can see now what’s
going on they are off and running as we
get to 2014 they made some acquisitions
acquisitions of consequences good
consequences bad consequences there’s a
consequence with every act you take or
act you don’t take and the act they took
here is they went and they purchased
some companies MapMyFitness
they bought this right at the end of 13
and paid a hundred and fifty million
dollars for it then MyFitnessPal they
closed that at the beginning of 15 for
475 million and endomondo it closed that
in beginning of 2015
485 million all of this done a little
bit before 14 and at the beginning of 15
added up to 700 million dollars well
where did that money come from well some
of it came out of their profits but
let’s take a look here these pink
numbers up here is the amount of debt
that the company had it had a hundred
million dollars in debt in 14 that grew
to 300 million in 15 seven hundred
million in 16 and 1 billion in 17 and we
can see what’s happening to the stock
price so keep that debt in mind right
now and all and these acquisitions that
they made for companies that were going
to help you you know incorporate into
the underarmor bran or into the Under
Armour of Footwear running shoes things
you could track your fitness and take
advantage of apps that were on the
market and do things like that so it
wasn’t lying with the market and in line
with what Nike and others were doing but
it came at a price I mean it was 700
million dollars to acquire these
hello everyone I’m coming to you from
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entitled the biz doc mailbag now let’s
get back to the case study anyway in
2015 they crossed four billion dollars
in sales
but 233 million in profit in other words
they did another billion in revenue but
they only added another 25 million
dollars in net income at the bottom well
the market started reacting to this in
2016 they were up to 4.8 billion and
look at this for the first time their
net income goes down from 233 to 198
uh-oh then four point nine billion
dollars in revenue in 17 – that’s a
negative – 48 million dollars yes the
debt was over a billion dollars in 2017
going from a hundred million dollars to
a billion that’s a 10x run-up in debt
over these years at a time or your net
incomes going there which causes your
stock to look like a roller coaster and
there’s only one word for this and that
is damn man that is a perfect storm of
trouble the decade of growth was
officially over and those of you have
been paying attention you’ll have seen
right around early 16 and the the volume
really got turned up on this – mid 16
people were saying okay the run is over
for Under Armor the run is over as a
couple things happen back in 13 they
signed two super athletes they signed
jordan Spieth in golf but they also
signed Seth Curry the Golden State
Warriors and they were now competing
with the big boys for these big
celebrity at
endorsement deals and both of those
deals were mammoth deals as they get
over here you can see they’ve got those
deals costs money
affecting net income and the debt you
got to pay interest on that affecting
net income and you can see they were
absolutely punished there’s been a
little roll up here at the beginning of
2018 that I’ll talk about in a minute
but you can see the market was very
upset and there it went so now let’s
take a look at some things that happen
to them and I’m going to talk about
lessons in a minute that matter for you
and me so we’ve covered the history I’ve
taken you through the decade of growth
and now let’s talk about the things that
happened here first of all Sports
Authority goes bankrupt Sports Authority
we know they were like Dick’s Sporting
Goods giant stores with everything in
there from golf to tennis to baseball
for your kids everything was in there
and a what they called a big box
retailer they went down and they were
generating 2.4 billion dollars of
revenue well where was that 2.4 billion
dollars going what was going to Nike to
adidas to Under Armour and also we have
the end of 2016 which was the u.s.
presidential election now I don’t want
to get into politics here but I’m just
gonna say what happened I’m I’m not
taking sides but Kevin Plank went out
and this is what he did he basically
announced that he supported some things
that the new President Trump was doing
some of those things a lot of people
were not pleased with like you know
controlled immigration closing borders
there’s a lot of things that we all rat
reacted to well and I’m not going to
judge it one way or the other
but if you are a CEO of a public company
there is a reality about politics you
can get behind a cause like you know
global warming or something like that
but as we know half of the market feels
this way half of the market feels that
way and if you’re trying to sell Under
Armor Church and footwear to everybody
you need to step back because if you’re
on the stock market one of your duties
is a CEO and many of you may disagree
with this but your duty as a CEO it’s a
return for the sheriff
elders plural shareholders and some of
them be liberals some of them be
conservative someone being Green Party
some of them be moderate in the middle
and not care about politics the fact is
they’re all your shareholders and you
have a duty to give a return to all the
shareholders so you need to tread
carefully and companies like Starbucks
have said things very boldly and had
protests and boycotts there’s a lot of
places out there where you have to be
ready for the fire if you take a stance
and in this case plank decided that he
was going to support the new president
and also he got involved in the Business
Council well the more things happen that
were controversial that cap brought a
big spotlight on the people that were
part of the presidential Council one of
those was curry so all these are not
bullet points these are negatives so the
whole political thing regardless of how
you feel about it became a negative for
Under Armor and he ultimately took out a
full-page ad and says hey let me explain
what I mean and curry had tweeted and
said I’m wearing Under Armour shoes but
I’m really not on board with the CEO
that’s horrible you’re paying curry all
this money to be you know this icon for
your shoes and suddenly many people in
the NBA the players are like hey I don’t
like what Under Armour saying had the
opposite effect and that was bad what
was also negative is they made a move to
add coals and to start selling their
garments and their Footwear through
coals and people thought that coals was
down market on brand perception and
Dick’s Sporting Goods got a little upset
because if you’ve read Dick’s Sporting
Goods bought what was left of Sports
Authority so you would have thought that
Under Armour would have doubled down on
Dick’s Sporting Goods and said hey
Sports Authority is gone you’re gonna
get all that sales and revenue let’s
double down on what we’re doing together
well Dick’s was a little annoyed with
what happened at Kohl’s so that ended up
being a negative then there was a report
that came out from Piper Jaffray and
Piper Jaffray did this very detailed
report on youth and brands the Piper
Jaffray survey was terrible for
Under Armor first it indicated that
teens were backing away from the
underarmor brand and they didn’t see it
as hip second when it got down to the
survey about shoes they had dropped from
number fourteen in terms of brand
preference to number twenty-four and
they scored number one on the following
question can you tell us what brand
you’re no longer wearing Under Armour
came out number one
all of this was terrible at a time were
65% of Nikes revenue was shoes 20% of
Under Armour’s revenues shoes and they
were trying to come up and at the time
they’re trying to come up Steph Curry is
annoyed with what the political
statements were and the youth in America
were suddenly saying I don’t know if I
want to wear that brand there was also a
quote from NBA star Kevin Durant that
says everybody knows that none of the
ballers want to wear Under Armour and he
turned down Under Armour at the last
minute and took a much fatter contract
with one of the big – you know Nike and
Adidas that were scoring all the
athletes so the worst of all possible
worlds was happening for Under Armour in
terms of teen preference for the brand
they had the amount how hip they felt
the brand was and this was hard data
that was coming out so you’ve got all
this things are coming at the time where
their debt is over at a billion and
their net income is here they lose a key
distributor all of this was coming
together so what they do about it well
early this year Kevin Plank was out
there on Business News talking about
where they’re gonna be going he was
interviewed by Jim Cramer on Mad Money
and he said we did three major things in
2017 we upgraded our systems we
implemented a massive back-office system
s AP so we’re never going to have to do
that again and we have the scale that a
great company needs we also changed our
structures so we went from having a head
of apparel and a head of footwear and a
head of accessories to having categories
like a head of running a head of
training and had a basketball when I
listen to that I hear some things I say
wait a minute
so you’re restructuring inside a company
you’re already a four billion dollar
company and after you crash like this
and you have these issues you’re almost
five billion dollars in sales and you
got work to do and what you’re saying is
you have to you’ve implemented s AP
back-office system and you’ve hired some
executives to be head of the basic
sports categories this seems that that
is in inside things that you should have
been doing all the way
why weren’t you thinking about that when
you were a two and three billion dollar
company seems to be that that you know
pointing at that backs away from you’ve
got all this team perception about how
hip your brand is that’s related to your
brand and your product that’s related to
product and marketing so it would seem
to me that when I listen to those things
I’m like where is marketing where’s
brand so okay you’re gonna do some of
that because you’re you’re going
international and building up your
international business but it seems to
me that some of this you needs to be
coming forward as things that you’re
doing all along and there were a couple
other things they were released at the
end of seventeen they said that the
curry for sneaker had supply chain
issues they were trying to get the right
mix of product and trying to get them
built and into the market well that’s no
good if you’re having trouble like
making sneakers also there was a war
between Nike and Adidas adidas had been
kicking Nikes butt in a lot of areas
especially related to Olympic sports and
as we know 2018 was an Olympic year
Winter Olympic year and Nike was
investing in building and product and
doing a lot of things to fight back so
you had adidas crushing Nike in certain
segments Nike trying to fight back and
as they fought themselves Under Armour
that was a challenger suddenly is
getting pushed down and that’s what’s
going on and so what you have here is an
opportunity to focus on the brand that
is Under Armour do you remember in 2006
the NFL ad click-clack click-clack it
was the cleats coming down the the
concrete going toward the the playing
field and it says you can run with us or
you can run from us and it was just an
amazing thing this was this brash young
differentiated challenger brand that was
featured in a movie that had the hip new
shirts that word had technology in them
in terms of the kind of
they were all of that has now been
copied and your brand coolness is being
seen as diminishing in its glow and
value so there you have it you’re
sitting here with all this going on and
in the beginning of 18 you announced a
data breach on some of your running and
fitness tracking so it’s like great now
you’re one of the many companies that’s
dealing with data breaches so when I
look at all this and I say them saying
that the bright spots are gonna be they
get Kohl’s international and systems I
look at the brand I look at the product
and I hear a CEO saying hey man we got
this we’re gonna be ok there’s gonna be
a tough chapter one of his others
interviews he said this he told the
street we’re getting incrementally
better every single day and we’re
feeling that right now we’re not
declaring victory and we’re not waving
flags at this point it’s a journey but
we feel good about it in a nutshell our
brand is very strong and this is the
early innings of global growth we just
need to build a great company and if you
build a great company Wall Street will
get everything it’s looking for wait a
minute I didn’t hear anything about
product I didn’t hear anything about
marketing did you I heard an indecisive
CEO trying to say everything’s going to
be ok and we’ve got this and I think the
future for Under Armour lies in one area
product that buffeted by marketing the
brand has to be glossed to bring back
for what it meant as the Challenger and
the cool brand and the products have to
follow so now let’s go to lessons for
you and me it doesn’t matter how big of
a company were growing is I like to say
if you’re running a t-shirt company in
Berlin or you’re running a jelly company
in Belarus it doesn’t matter there are
some lessons here in Under Armour for
that just average entrepreneur like you
and make first of all now what or then
what with product yuccas Peschel e
fashion products you constantly have to
be saying then what hey we got the shoe
and it’s being adopted then what then
what then what because everybody wants
to copy you and I’m not talking about
overseas copying and counterfeiting I’m
talking about people
or watching in fashion the profit is too
high the opportunity is too great and
they will be watching an underarm finds
itself in a situation here saying now
what if you find yourself saying now
what because you’re reacting that is a
sign that you have missed a step in the
market development the market got ahead
of you or competitors past you you
always have to wake up every morning
saying then what we’re doing this today
then what we’re doing that today then
what you need to be in execute and then
what mode staying ahead of market curves
and changing tastes not caught out by a
competitor Shoop called the fast
follower that passes you by where you’re
now trapped with oh now what because
you’re in reaction mode the second
lesson is you can get fully consumed by
the inside such as operations but the
outside is everything product
distribution and sales and this is what
I was referencing when I was talking
about everything here and listen to what
the CEO is saying he’s talking about si
P and and you know systems and hiring
executives that’s the inside you can get
consumed by the inside especially at a
time of crisis but you got to stay on
the outside if you’ve got trouble in
your company you need to pend on that
CEO oh and you’d say you’re the inside
guy and I’m the CEO and I’m taking sales
product and marketing and we’re going to
the outside and we’re gonna make sure
that we are in the face of customers and
we were looking at real customer data
and we’re making up our mind about how
we’re gonna make the product better and
more hip and return it to prominence
because if you’re worrying about all the
inside and you’re sitting there telling
Jim Cramer oh we have this back-office
software system from sa P that’s
wonderful great software but that’s not
what I want to see Kevin Plank on TV
talking about I want to see him talking
about we’re gonna win the hearts of the
NBA players with our next product you
will not believe what we’re gonna do for
the runner with our next product it may
be a niche but watch what we do in golf
and it’s going to be featured with
Jordan speith marketing product hip
that’s what it’s going to be and I think
that in this case there’s a perfect
example of Kevin Plank right now is
caught on the inside reacting managing
his debt
doing all these things like this rather
than being that guy that was on the
outside that was going to Georgia Tech
and making a first deal for these
unbelievable shirts that work is good
for your upper body as compression
shorts were working for your lower body
and it’s called Under Armour and I’m
gonna show you what it is and what we’re
all about that is the guy he needs to be
now on the outside and that my friends
is the Under Armour case study there are
more details on this product on that
product and some of you may feel
strongly about this shoe or that shoe is
being a contributing factor but when you
step back from it this line is the case
study of Under Armour from the decade of
growth to the 36 months of hell they’re
enduring now thank you for watching and
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you so much for watching and until next
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