- Under Armour has fallen into a bit of a rut.
- The company says it is currently under federal investigation over its accounting practices.
- On October 22, the company's founder, Kevin Plank, announced he would be stepping down from his role as CEO after 23 years. Plank will be replaced by COO Patrik Frisk.
- It has had massive problems in the past, including $1.3 billion in leftover merchandise in 2018, shrinking popularity among teens, and a scandal involving executives going to strip clubs and expensing the outings.
- We traced the rise and fall of Under Armour, from its early days as a powerful force in the athletic-wear sphere to its current struggles and decline.
- Visit BusinessInsider.com for more stories.
Under Armour is in trouble.
While similar sports retailers like Nike and Adidas are posting positive sales growth numbers relatively consistently in past years, Under Armour has sputtered. And recently, things have taken another turn for the worse.
On October 22, its longtime leader Kevin Plank announced he would be stepping down from his position as CEO. The company announced that Plank, who founded the company in 1996, would become executive chairman and brand chief while his CEO duties would be taken on by COO Patrik Frisk. These changes will go into effect on January 1.
The company also said earlier this month that it is currently under federal investigation over its accounting practices. In its most recent earnings call, it reported a 1% decline in revenue.
This isn't Under Armour's first rough patch. The company has experienced many ups and downs in its over 20-year history. In 2018, the level of the company's leftover inventory grew 11% to $1.3 billion in the second quarter. That same year, Under Armour executives were embroiled in a scandal that involved going to strip clubs on the company's dime, a practice that was officially banned in February 2018, The Wall Street Journal reported.
Under Armour announced a turnaround plan to revive the brand in December 2018. In September, the company announced in a press release that Stephanie Pugliese would take over the role of president of Under Armour North America as part of a strategy to further establish the presence of the brand in the company's home market.
Under Armour wasn't always the trouble-stricken brand that it is today. It once seemed poised to overtake the sportswear market in what seemed like a true Cinderella story.
From its rise to a once-$15 billion athletic-apparel empire and its eventual slow decline, here is the complete story of Under Armour so far.
SEE ALSO: Here's how Under Armour grew into a $15 billion athletic-apparel empire
The story begins with Kevin Plank, Under Armour's founder and CEO. A team captain on the University of Maryland football team, Plank wanted to design athletic-wear that could withstand sweat and intense activity.
Source: Bethesda Magazine
Plank founded Under Armour in 1996 and designed the first prototype that year. It was called "The Shorty" and was tight, soft, and designed as a base layer to wick away sweat to keep athletes dry.
Source: Under Armour, Business Insider
This performance-enhancing goal is still evident in the Under Armour's clothing today. A recent visit to Under Armour's brand house in New York City revealed a display for the brand's Rush line, which also utilizes special fabric to enhance performance and endurance.
In the company's early days, Plank sold his merchandise from his grandmother's basement in Washington, DC. The company also a breakthrough when it made major deals with Georgia Institute of Technology and North Carolina State University.
Source: Sports Illustrated
Eventually, Plank started sending prototypes to contacts in the NFL to spread the word. Stars like Deion Sanders eventually bought some shirts, The New Yorker reported, and it made the jump from college to professional.
Source: Forbes,The New Yorker,Sports Illustrated
By the early 2000s, Under Armour was soaring. The company was expanding into new merchandise and advertising on television. Sales exceeded $200 million by 2004 and Plank decided to take the company public in 2005. The company raised $157 million in the IPO.
Source: The New Yorker,Marketwatch, Biz Journals
Endorsements and media attention were helping the brand solidify among the titans of sport and athletic wear. In 2010, the company signed a personal endorsement deal with New England Patriots quarterback Tom Brady.
Source: Sports Pro Media
In 2011, Under Armour partnered with Carolina Panthers quarterback Cam Newton, who became one of the company's most prized endorsers. Below are his Under Armour cleats.
Source: The New Yorker, Business Insider.CNBC
Under Armour also began to include women in its advertisements and endorsements, representing a stark change from the company's gruff and tough football beginnings. In 2014, the company signed Gisele Bundchen, Tom Brady's wife, and featured ballerina Misty Copeland in an advertisement that went viral.
Today, Under Armour has a vast selection of women's clothing, including sports bras, leggings, and tank tops.
Under Armour bought MapMyFitness in 2013 for $150 million, followed by Endomondo for $85 million and MyFitnessPal for $475 million in 2015. The acquisitions of the fitness and health-focused apps and technology were part of the company's efforts to expand its digital offerings.
Source: The Wall Street Journal
Under Armour experienced a minor setback in 2014 when the suits it designed for the US speed skating team were blamed by some for slowing down Olympic skaters in 2014 Winter Olympics in Sochi, Russia, according to the Wall Street Journal.
Source: The Wall Street Journal
That same year, Under Armour became the second best-selling sportswear brand in the US, surpassing Adidas but still trailing behind Nike by a wide margin.
Source: Business Insider
In 2015, Under Armour had another win when it signed a deal with boxing legend Muhammad Ali.
Source: Business Insider
In 2016, Under Armour introduced the UA SpeedForm Gemini 2 Record Equipped, its first smart shoe with a built-in sensor to store and track data.
Source: Under Armour
In 2016, it was also announced the company would become the official supplier of uniforms for Major League Baseball — its first major league-wide deal.
Source: Business Insider
The next year, the company introduced its sleepwear designed to help speed up the body's recovery process. We found some merchandise in stores this year.
Source: Under Armour
2017 was a turning point for Under Armour. The company's stock fell more than 40% and it reported its first quarterly loss ever. At least five top executives left the company that year, including footwear chief Peter Ruppe.
Source: The Wall Street Journal, Reuters, Business Insider
It also became clear the company had missed the boat on the athleisure style trend, with Plank saying the company needed to "become more fashion."
Earlier that year, Plank upset many customers when he praised President Trump in an interview with CNBC, calling him "a real asset for the country." The company later clarified the CEO's comments via multiple statements.
Source: Business Insider
Another blow came in 2018, when some athletes at UCLA refused to wear Under Armour's shoes after complaining that the bottoms were peeling off. Under Armour was the school's official shoe and apparel sponsor per a $280 million deal in 2016.
Source: Business Insider
Also in 2018, Dick's Sporting Goods' CEO called out Under Armour in an earnings call for broadening its distribution of merchandise in multiple new stores, saying the brand had a "significant weakness."
Source: Business Insider
Suddenly, Under Armour was losing appeal among its former customer base. Most shockingly, teens were abandoning the brand in huge numbers, Piper Jaffray's "Taking Stock of Teens" survey showed in April of 2018. The survey revealed that Under Armour was the No. 1 most cited "old" brand teens were no longer wearing.
Source: Business Insider
Under Armour saw some brief success in the July 2018, when its North American sales jumped for the first time in a year. But the brand still faced issues when it came to differentiating itself from competitors like Adidas and Nike, resulting in a "lack of brand clarity," according to Neil Saunders, a retail analyst and consultant.
Source: Business Insider
Despite some success, the company was still stuck with $1.3 billion worth of unsold inventory. To make matters worse, it emerged that executives and employees of Under Armour had been charging the company for visits to strip clubs with athletes or co-workers. This practice was put to an end earlier in 2018, but it didn't help the company's image.
Source: Business Insider,The Wall Street Journal
In September 2018, Under Armour announced a round of layoffs meant to help with growth and restructuring. One month later, the company beat profit expectations for its third-quarter earnings.
Source: Markets Insider, Markets Insider
Under Armour announced a turnaround plan in December to increase offerings for women and to focus more on the wants of the consumer. For a while, it seemed to be working.
Source: PR Newswire, Business Insider
It was announced in January 2019 that Under Armour backed out of its agreement with MLB to supply uniforms, saving the company a reported $50 million.
Source: Sports Pro Media
The uncertainty quickly returned. Though inventory numbers were down 26%, the company missed sales expectations for the second quarter of 2019 and shares fell 15% following the announcement. The company also updated its full-year guidance for lower sales in North America as the company continued to struggle in the athletic-wear game.
Source: Markets Insider, CNBC, Under Armour
In September, Under Armour announced Stephanie Pugliese as the new North American president. Then-President and COO Patrik Frisk said that Pugliese's "demonstrated record of leadership and retail expertise significantly strengthens our ability to further amplify Under Armour as the pre-eminent athletic performance brand in our home market.”
Source: Under Armour
On October 22, the company announced that Plank would be stepping down from his role as CEO after 23 years to become executive chairman and brand chief of Under Armour.
Plank will be replaced by Under Armour's current COO Patrik Frisk, who joined the company in 2017 after being CEO of Aldo Group.
In a statement to the press announcing his resignation from his duties as CEO, Plank said:
"Patrik is the right person to serve as Under Armour's next CEO. As my partner during the most transformative chapter in our history, he has been exceptional in his ability to translate our brand's vision into world-class execution by focusing on our long-term strategy and re-engineering our ecosystem through a strategic, operational and cultural transformation."
Shortly after, on November 3, the company said that the US Securities and Exchange Commission and the US Department of Justice had been investigating its accounting practices since 2017. An Under Armour representative told Business Insider in a statement that the company was cooperating with the investigations and stood behind its accounting disclosures.
Source: Business Insider, The Wall Street Journal
A few weeks later, former executives told the Wall Street Journal that the company often redirected goods that were intended for factory stores to off-price chains like TJ Maxx near the end of each quarter to hit sales numbers.
Source: The Wall Street Journal
In an official company statement sent to Business Insider, Under Armour said, "As we have stated previously, we firmly believe that our disclosures and our accounting practices have been entirely appropriate."
In an email sent to employees on Friday and obtained by Business Insider, Plank responded to the Journal's report: "Given recent events that have entered the realm of public opinion without full context, it is disappointing to have our integrity and reputation called into question."
Source: Business Insider