Under Armour’s Billion Dollar Question: Is it Game Over or Half Time? A Case Study for Entrepreneurs

Hello everyone, welcome back to the

case

studies with the business document and this week it's Under Armour. I'll walk you through three things, a brief history of the company, how did you get from where you started? I'm not going to spend much. The

time

in that second is what has happened now, what I call the decade of growth and then the three years of hell and the third thing we will overcome is what is happening now and where they need to go in the future. future, so let's go to the board and start the story. First, there was once Kevin Plank 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 the compression shorts fit and he was thinking why don't we find some of this material and make something like a kind of compression shirt that would take the sweat away and be really innovative.

And so he did and he did it in 1996 and in 1996 total sales were $17,000, but that's respectable and he got the company off the ground for the next 24 months, he was able to get it moving a little bit and he wasn't paying himself , so I was really investing every penny I could into the business. He earned his first college contract and was a former college athlete. He himself had friends who were college athletes, of course, and when they could get rid of or gatech. I think he was Georgia Tech. It was really exciting for the young company.

Shortly after, they were also able to take advantage of the opportunity with NFL Europe and the interesting thing is that they had revenues of $100,000 in 1997 when they got the deal with Georgia Tech and then after. the NFL Europe was three hundred and ninety four thousand so they had a respectable company the next year something magical would happen they received a phone call from Hollywood and there were some back and forth conversations they were looking for sports clothing and they were able to get their product on any given Sunday, remember that Al Pacino was the coach in this incredible football movie.

Well, they have a million

dollar

s in sales thanks to the sales and recognition that came from that movie on any given Sunday and you can't buy that kind of marketing, so here they are doing a very good job of making this garment with a fabric of compression that compression shorts were made out of to keep sweat away from you, calling it Under Armor instead of underwear, it's armor for your body underneath your workout, your your your pads and their t-shirt and here they were working , then it is surprising that sales increased 5

time

s between 1999 and 2000, since one at a time they got all the sports leagues in the United States to become authorized suppliers and they were up and running and from 2000 to 2001 they went from five to twenty-eight million of

dollar

s and you can see that they really have momentum from the foot to the o2, all of a sudden they went up to fifty million, then they added Under Armor women in the oh three and that was the first time they crossed a hundred million dollars. in sales and if you look at that, you know it took them seven years to do it, so this is really the story of entrepreneur Kevin Plank.

He had a dream for the fabric to come out of need and understanding that the client himself was an athlete and it wasn't an overnight success, he sat there working for seven years to get here, a lot of people say, wow, This $100 million company was built overnight, no, it's another one of those great business stories while he was hard at work. You know, 80 hours a week to create a hundred million dollar company, so he worked for seven years to become an overnight success, yet it was the first ad that came out and they doubled the sales of three 204 to two hundred million dollars, and maybe you remember it.

The original advertisement was to protect this house, the house of my body, they were an armor, these clothes protected this house and it was a double meaning with the equipment, protect our house, it was very well prepared, great marketing, so here there are not four and they are in two hundred million dollars and then on O5 they say we're going to add golf to the lineup and then launch an IPO, so here they are about ten years after they started, after a decade of working hard and building so far a 281 million revenue company of dollars, they were underway and it was time to go to Wall Street with the IPO, so let me go around it this way, this would start what I call the decade of growth and during the IPO they raised about a hundred fifty seven. million, so that was in their bank account after the IPO and now the shares are traded on the market.

You have value to the company that's there, but somehow they went from oh five six seven, they went from kids eighty-one to four hundred. From thirty-one to six hundred million dollars, then you can see that 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 they were only thirty-eight million. dollars of net income over seven hundred and twenty-five million dollars of income and you can see that this line is the stock price line adjusted for stock splits and things like that for those who are more technical and looked at it, this is the line adjusted for divisions and they did go from Oh 8 209, you know, net income went to 46 and then 68 and they had surpassed a

billion

dollars in sales in 2010, so if you look at this, the first five years that they were public had little , they had a roll up. and then they had a drop and then they started going up and they hit $1

billion

, but now look what's happening with the net income.

Its net income in 2011, ninety-six million dollars, was almost one hundred million dollars of profits coming from 1.5 billion. dollar company because they too, Chris, you know a billion right there in 2010 and look at this orange line as we continue, you have one point eight three billion in sales and one billion two hundred and twenty-eight million in net income, 2.3 billion , so he took them, you know? 96 to 2000 and 1014 years to earn their first billion and 24 months later they did not increase, they had crossed their second billion in phenomenal income and were above 162 million and in that income in 2014 they made three billion dollars in income . and two hundred million dollars of net income and now you can see what is happening, they are underway as we get to 2014, they made some acquisitions, consequence acquisitions, good consequences, bad consequences, there is a consequence with every act that you do or that you don't do.

I didn't take it and the act they took here was they went and bought some MapMyFitness companies, they bought this right at the end of '13 and they paid a hundred and fifty million dollars for it, then MyFitnessPal they closed it at the beginning of '15 for 475 million and endomondo closed that At the beginning of 2015, 485 million did all this a little before the 14th and at the beginning of the 15th they added 700 million dollars. Well, where did that money come from? Well, part of it came from their profits, but let's take a look here at these pink numbers up here is the How much debt 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 a billion in 17 and we can see what's happening. to the stock price, so take into account that debt right now and all the acquisitions that they made for companies that were going to help you incorporate into Under Armor Bran or Under Armor of Footwear running shoes things that could track your status physical. and take advantage of the applications that were on the market and do things like that so as not to lie in the market and in line with what Nike and others were doing, but it had a price, I mean, it was 700 million dollars to acquire these Hello everyone , I come to you from Karbala Gap with this special announcement.

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study

anyway in 2015 they crossed four billion dollars in sales but 233 million in profits in other words , they made another billion in revenue but only added another $25 million in net income.

Deep down, the market started reacting to this in 2016, they hit 4.8 billion and look at this for the first time, their net income drops from 233 to 198 uh-oh, then four point nine billion dollars in revenue in 17 , that is negative: 48 million dollars, yes, the debt exceeded one billion dollars in 2017, going from one hundred million dollars to one billion, which represents a 10-fold increase in debt in these years at the same time or your net income goes there making your stock look like a rollercoaster and there's only one word for this and it's damn, it's a perfect storm of problems, the decade of growth is officially over and those of you have been paying attention , you'll have seen it around 16 and The volume really went up with this: mid 16 people were saying okay, the race was over for Under Armour, the race was over when a couple of things happened at 13, they signed two super athletes, they signed Jordan Spieth in golf, but they also signed Seth.

Curry, the Golden State Warriors and now they were competing with the big guys for these big celebrities in endorsement deals and both deals were gigantic deals. As they get here, you can see that they have those agreements that cost money and affect net income. debt, you have to pay interest on that which affects the net income and you can see that they were absolutely punished. There was a little spike here in early 2018 which I'll talk about in a minute, but you can see the market was very upset and that's it, so now let's look at some things happening to them and I'll talk about lessons in a minute. that are important to you and me, so we have covered the story.

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 giant Dick's Sporting Goods stores with everything from golf to tennis to baseball for their kids, it was all there and what They called a big retailer, they went down and they were generating $2.4 billion in revenue. Well, where did that $2.4 billion for Nike, Adidas and Under Armor go? And we also have the end of 2016, which was the US presidential election now. I don't want to get into politics here, but I'm just going to say what happened.

I'm not taking sides, but Kevin Plank came 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 that a lot of people were not happy with, like you know, controlled immigration, closing borders, there are a lot of things that we all react well to and I'm not going to judge him one way or other. the other, but if you're CEO of a public company, there's a reality about politics, you can support a cause like you know about global warming or something, but as we know,

half

the market feels that way,

half

the market feel the same. way and if you are trying to sell Under Armor Church and shoes to everyone, you need to take a step back because if you are in the stock market, one of your duties is that of CEO and many of you may not agree with this , but his duty as CEO, is a return for the sheriff's elders, plural shareholders and some of them are liberals, some of them are conservatives, someone is from the Green Party, some of them are moderates in the middle and they don't care about the politics, the fact is that everyone is your shareholders and you have a duty to give a return to all shareholders, so you have to tread carefully and companies like Starbucks have said things very boldly and have had protests and boycotts.

There are a lot of places out there where you have to be prepared for fire if you make a decision. position and in this case Plank decided that he was going to support the new president and also got involved in the Business Council, well, the more controversial things that happened, that limit attracted a lot of attention to the people who were part of the Presidential Council. one of those was curry, so they're not cartoons, they're negative, so the whole political thing, regardless of how you feel about it, became a negative thing for Under Armor and they finally took out a full page ad and it said: " "Hey, let me explain what I want." Mean and Curry had tweeted and said I'm wearing Under Armor shoes but I actually disagree with the CEO, that's horrible, you're paying Curry all this money to be, you know this icon for your shoes and of course Suddenly, a lot of people in the NBA players say hey, I don't like what Under Armor said, it had the opposite effect and that was bad, whichAlso negative is that they made a move to add carbon and start selling their clothing and footwear through carbon and people thought that carbons was down in the market in terms of brand perception and Dick's Sporting Goods got a little upset. little because if you read that Dick's Sporting Goods bought what was left of Sports Authority, you would have thought Under Armor would have doubled down on Dick's Sporting Goods and said "hello." Sports Authority is gone, you're going to get all those sales and revenue, let's double what we're doing together, well Dick's was a little upset with what happened at Kohl's so it ended up being negative and then a report came out. by Piper Jaffray and Piper Jaffray did this very detailed report on youth and brands.

Piper Jaffray's survey was terrible for Under Armour. He first indicated that teenagers were moving away from the Underarmor brand and did not see it as hip. Second when she came down. As for shoes, they had dropped from fourteenth in terms of brand preference to number twenty-four and were ranked number one in the next question. Can you tell us which brand you no longer use? Under Armor came out number one. All this was terrible. At a time when 65% of Nike's revenue was shoes, 20% of Under Armor's revenue was shoes and they were trying to move up and at that point they're trying to move up.

Steph Curry is upset with political statements and youth in Suddenly America said: I don't know if I want to use that brand. There was also a quote from NBA star Kevin Durant saying that everyone knows that none of the players want to wear Under Armor and he turned down Under Armor at the last minute. and he accepted a much bigger contract with one of the big guys: you know, Nike and Adidas, who were rating all the athletes, so the worst of all possible worlds was happening for Under Armor in terms of athlete preference. teenagers because of the brand they had, the amount of hips they had.

I felt like the brand was and this was hard data that was coming out, so you have all these things that are coming at the time when their debt is over a billion and their net income is here, they lose a key distributor, this was all coming. . together, so what do you do about it? Earlier this year, Kevin Plank was on Business News talking about where they're going. Jim Cramer interviewed him on Mad Money and he said we did three big things in 2017, we improved our we implemented a huge AP back office system so we'll never have to do that again and we have the scale that a large 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 I had a basketball when I hear that I hear some things I say wait a minute so you're restructuring within a company you're already a four billion dollar company and after crashing like this and having these problems, you have almost five billion dollars in sales and you have work to do and what you're saying is that you have to implement the AP administrative system and you have hired some executives to be heads of the basic sports categories.

This sounds like it's on internal things you should have been doing all along. Why didn't you think about that when you were a two or three billion dollar company? It sounds like you know you're pointing backwards and you have this whole team perception of how modern your brand is, that it's related to your brand and your product, that it's related to the product and the marketing, so it seems to me that when you Listen those things. I wonder where the marketing is, where the brand is. Okay, you're going to do some of that because you're going to go international and develop your international business, but it seems to me that you need some of this.

They'll be presented as things you're doing all the time and there were a couple more things that were released at the end of seventeen. They said sneaker curry had supply chain issues. They were trying to get the right mix of products and testing. to build them and put them on the market, that's not good if you have problems like making sneakers, plus there was a war between Nike and Adidas, Adidas had been kicking Nike's butt in many areas, especially related to Olympic sports and, like We know, 2018 was an Olympic year, a Winter Olympic year and Nike was investing in construction and products and doing a lot of things to fight back, so Adidas crushed Nike in certain segments.

Nike was trying to fight back, and while they were fighting themselves, Under Armor was a challenger. suddenly it's being pushed down and that's what's happening, so what you have here is an opportunity to focus on the Under Armor brand. Do you remember in 2006 the NFL announcement, click-clack, click-clack, it was the shoes that came down the concrete that goes to the field and says you can run with us or you can run from us and it was something surprising: It was this young, bold, challenging, differentiated brand that appeared in a movie that had new, trendy t-shirts with that word on it. they had technology in terms of the type of things they were, all of that has now been copied and the freshness of their brand is considered to be diminishing in its shine and value, so there you have it, you're sitting here with all this going on and in a early 18 you announced a data breach on some of your running and fitness tracking so it's great now that you're one of the many companies dealing with data breaches so when I look at all this and tell you that They say the bright spots will be Kohl's International and Systems. “I look at the brand, I look at the product and I hear a CEO say: Hey, we've got this, we'll be fine, there's going to be a tough chapter in one of your other interviews,” he said.

This is what he told the street: We're getting better every day and we feel like right now we're not declaring victory and we're not waving flags right now, it's a journey, but bottom line we feel good about it. our brand is very strong and these are the first beginnings of global growth, we just need to build a great company and if you build a great company, Wall Street will get everything it wants, wait a minute. I didn't hear anything about the product. I didn't hear anything about marketing, right? I heard an indecisive CEO trying to say that everything is going to be fine and we have this, and I think the future of Under Armor lies in a product area that was hit by marketing, the brand needs to be glossed over. to take back what it meant as Challenger and the cool brand and products have to follow, so now let's get to the lessons for you and me, no matter how big the company you are growing, I like to say if you If you run a t-shirt company in Berlin or a gelatin company in Belarus, it doesn't matter, there are some lessons here at Under Armor for that average entrepreneur like you and first of all, do what or then with what. product yucas Peschel e fashion products you constantly have to be saying so what, we have the shoe and it is being adopted so what then what then what because everyone wants to copy you and I'm not talking about copies and fakes abroad, I'm talking about the people or look at fashion, the profits are too high, the opportunity is too big and they will be looking at an armpit you find yourself in a situation here saying now, what if you find yourself saying now what? because you are reacting, that is a sign that you have missed a step in the development of the market, the market has overtaken you or competitors have overtaken you, you always have to wake up every morning saying what are we doing this today, what are we going to do? do that today, then what do you need to be on execute and then how to stay ahead of the market curves and change tastes not get caught by a competitor Shoop called the fast follower who passes by where you are now trapped oh now what because you are in mode of reaction the second lesson is you can be completely consumed by the inside, like operations, but the outside is everything, distribution and sales of products and this is what I was referring to when I was talking about everything here and I heard what What does the CEO say what he's talking about if P and you know. systems and executive hiring, that's the inside, you can let yourself be consumed by the inside, especially in times of crisis, but you have to stay outside, if you have problems in your company, you have to depend on that CEO, and you would say you are the inside guy and I'm the CEO and I'm in charge of product sales and marketing and we're going overseas and we're going to make sure we're in front of customers and looking at real customers. customer data and we're deciding how we're going to make the product better and more modern and bring it back to prominence because if you care about everything inside and you're sitting there saying to Jim Cramer, oh, we have this sa back office software system.

P is wonderful, excellent software, but that's not what I want to see Kevin Plank talk about on TV. I want to see him talk about how we're going to win the hearts of NBA players with our next product. I won't believe what we're going to do for the runner with our next product, it may be niche, but look at what we do in golf and it will show up in Jordan Speith's marketing product, that's what it will be and I think In this case, there's a perfect example of Kevin Plank right now, who's stuck on the inside reacting by managing his debt by doing all these things this way instead of being that guy on the outside going to Georgia Tech and making a first deal for these.

Amazing shirts that work and are good for the upper body as the compression shorts worked for the lower body and it's called Under Armor and I'll show you what it is and what it's all about, that's the kind you need be now. overseas and that, my friends, is the Under Armor case

study

. There are more details about this product in that product and some of you may feel strongly that this shoe or that shoe is being a contributing factor, but when you step away from it, this line is the case study of Under Armor from the decade of growth Until the 36 months of hell you are enduring now, thank you for watching and remember that we are on a mission to reach one million subscribers and when we do it it will be the first time. entrepreneur conference presented by value teaming and will feature Patrick BETT David and experts to help you improve your business, improving his community in the process.

Thank you very much for watching and until next time. I'm Tom Miller with the business. doc and I hope I have left you better than what I found.