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Under Armour & Lululemon Strategic Analysis

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How Under Armour is Changing the Way Athletes Live

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Under Armour Founder, Chairman and CEO, Kevin Plank, describes how the brand is changing their digital technology strategy to provide consumers with health and fitness monitoring apps. See more from Retail's BIG Show 2016: http://bigshow16.nrf.com/recap

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Under Armour & Lululemon Strategic Analysis

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A first look inside the new facility where Under Armour creates athletic apparel of the future

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Under Armour's new innovation lab, the Lighthouse, is a state-of-the art facility to create and test the next generation of athletic products. It will also create new capabilities for faster and more efficient manufacturing. -------------------------------------------------- Follow BI Video on Twitter: http://bit.ly/1oS68Zs Follow BI on Facebook: http://bit.ly/1W9Lk0n Read more: http://www.businessinsider.com/ -------------------------------------------------- Business Insider is the fastest growing business news site in the US.

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Under Armour & Lululemon Strategic Analysis

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University of Washington Foster School of Business

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Daniel Shaw | Senior Strategy Analyst | Under Armour

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Senior Strategy Analyst at Under Armour, Daniel Shaw, discusses his role at Under Armour, why he decided to attend the Historically Black College, Morehouse and how he was able to cope with unemployment. www.grnpaper.com

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Under Armour laid out an ambitious strategy to catch up to market leader Nike.

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Nike used to eat companies like Under Armour for lunch.

Over the years, Converse, Reebok, Adidas and a host of lightweight wannabes each tried to knock Phil Knight's Swoosh off its pedestal - using technology, popular athletes as pitchmen and testosterone-fueled marketing campaigns.

They all failed.

But Knight may find the 19-year-old Under Armour a little tough to shake.

The company, founded by 42-year-old CEO Kevin Plank, is copying a page from Knight's marketing playbook - signing star athletes as pitchmen and plastering its logo on the uniforms of top college teams.

But Plank has sort of out-Knighted Knight.

Under Armour has under contract Jordan Spieth, the hottest golfer in the world, ranked No. 2. Tiger Woods, Nike's highest-profile golfer, is ranked No. 258.

Under Armour also has the hottest NBA star, Stephen Curry, to offset Nike's all world talent LeBron James.

On the business side, Under Armour shares have outdistanced Nike's over the past year, rising 64 percent to Nike's 46 percent.

Plank also signed super model Gisele Bundchen to appeal to women.

"It's a well-curated group of aspirational athletes and models," retail strategist Melissa Gonzalez told The Post. "It sells the story of inspiration."

Other rivals pale in comparison. Reebok never reached this point because they couldn't figure out how to connect with customers - and Adidas didn't excel because they offered so many contrasting trends, brand-building expert Denise Lee Yohn noted.

"Under Armour has successfully built a strong brand by engaging certain market segments really well," Yohn told The Post.

The retailer is able to do what past sporting apparel brands couldn't because its founder has stuck around without leaving things to committees and directors, according to The Retail Doctor CEO Bob Phibbs.

"They are scaling up so quickly because their founder is extremely competitive," Phibbs told The Post.

Coincidentally, Knight announced his plan to step down last month after a 51-year career with Nike. The company will find out if it can be as competitive without the founder's DNA walking its C suite.

To be sure, Under Armour's $3.1 billion in revenue is one-tenth of Nike's $30.1 billion - and Nike's 40 percent market share and relationship with retailers is rock-solid.

In fact, Nike's $3.9 billion in cash on hand is more than Under Armour's total revenue - so catching up to the champ will not be easy for Plank.

But a well-financed, well-run rival to Nike should make things interesting in the post-Knight era - for investors and consumers.

Under Armour should stay a popular company, but won't catch up to Nike for another 20 to 30 years, Morningstar analyst Paul Swinand said.

"Nike has the advantage of years of history before the conception of Under Armour in 1996 and has a wide gap in both US and international market share," Gonzalez told The Post.

Under Armour shares gained 10 cents on Friday to close at $96.05. Nike shares fell 0.8 percent to $113.04.

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Under Armour is using Nike's strategies better than Nike

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Nike used to eat companies like Under Armour for lunch. Over the years, Converse, Reebok, Adidas and a host of lightweight wannabes each tried to knock Phil Knight's Swoosh off its pedestal - using technology, popular athletes as pitchmen and testosterone-fueled marketing campaigns. They all failed.

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Nike has ruled the sportswear sector for years.

But Under Armour has slowly been eating into Nike's market share and is now the second most-popular athletic apparel brand in America. Adidas lags behind at number three.

The brand's secret to success isn't to imitate Nike's strategies. Instead, the brand focuses on what makes it different to drive sales.

Under Armour marketing executive Adrienne Lofton told Fast Company that the brand considers itself an "underdog brand."

"We work with athletes who most people wouldn't or didn't draft in the first round, or who they wouldn't traditionally give a prima ballerina title to. We pick that athlete with a chip on their shoulder and their desire to win because it aligns with our own attitude," she told Fast Company.

For instance, Under Armour partnered with Stephen Curry (a deal that has been paying off tremendously) - someone whom she says rose to success "because he trained every day, got up when he fell down, continuing to drive with all that unsexy work to achieve his goals."

And Misty Copeland, a star dancer, is an alternative choice - dancers face many obstacles en route to success.

Consider this the "anti-Nike" approach.

Nike is known for partnering with some of the most successful athletes out there - look no further than its partnerships with LeBron James and Michael Jordan. And Nike's iconic tag line 'just do it' is certainly a strong call to action, denouncing excuses completely. But what about after you've started the process? And what if 'just doing it' isn't so easy after all?

That's where Under Armour comes in.

"A lot of brands are about that initial motivation - just do it, get up, and go - we talk about how sustaining that effort is what makes the difference for an elite athlete, and we want to be the brand to show you how to do it," Lofton told Fast Company.

That said, Under Armour has certainly not had a shortage of stars partner with the brand, including Tom Brady and Gisele Bündchen, all of which have likely helped to contribute to the company's growth.

This mentality is certainly paying off. The brand is becoming a competitor not only to Nike, but also to Lululemon with its athleisure line for women and its coinciding empowering catchphrase, " I will what I want.

Rather than focusing on being aspirational or simply inspirational, the brand focuses on conveying the message that you must work hard to achieve your goals - a methodology that certainly sees benefits, whether you're an athlete, a businessman, or a sportswear company from Baltimore.

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Mallory Schlossberg, Business Insider US

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Under Armour's underdog strategy to becoming the anti-Nike

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Nike has ruled the sportswear sector for years. But Under Armour has slowly been eating into Nike's market share and is now the second most-popular athletic apparel brand in America. Adidas lags behind at number three. The brand's secret to success isn't to imitate Nike's strategies.

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In its twentieth year in business, ( Under Armour NYSE:UAA) has a come a long way from the niche company that sold moisture-wicking shirts targeted at football players. Today, depending on the ups and downs of the stock market, Under Armour is either the second or third largest sports apparel and footwear brand.
Palbir Nijjar owns shares of Nike and Under Armour. The Motley Fool owns shares of and recommends Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Although it's difficult to call Under Armour an underdog anymore, the company doesn't appear to be content with second or third place. Its fourth quarter results were impressive, showing meaningful year-over-year revenue growth in all parts of its business:

Apparel growth of 22%

Direct-to-consumer growth of 25%

International growth of 70%

Footwear growth of 95%

Let's take a closer look at the primary growth drivers.
Footwear
The success of Under Armour's footwear business can be summed up in two words: Stephen Curry. The NBA MVP's signature shoe was released early in the fourth quarter, and the effect it had on footwear revenue was a lot like Curry's basketball skills -- ridiculous.

At $678 million, Under Armour's footwear revenue in 2015 accounted for 17% of the top line. Just five years ago, footwear revenue was $182 million and 12% of total revenue. The company's vision is to have its footwear business grow larger than the apparel segment. It's still too early to know if the company can get there, but the momentum is certainly building in their favor.

International
At a time when a China slowdown is giving the global markets the jitters, CEO Kevin Plank opened the fourth quarter conference call by saying, "I want to wish you all a belated Happy New Year and wish those in China an early Guonian Hao."

The importance of the Chinese market is not lost upon Under Armour's management team. In fact, its signature basketball shoe, the Curry Two, was released six weeks ahead of the North American launch. Although Under Armour doesn't break out sales in China, Plank did mention triple-digit growth across greater China. Also, Under Armour's first $1 million revenue day came on Singles' Day, the Chinese equivalent of Black Friday.

As for the rest of the world, Under Armour has stepped up its game to become a truly global business. Over the past year, international sales grew 69% to nearly half a billion dollars. After years of being known as a North American brand, the contribution of international revenue to the overall business has accelerated significantly since 2013.

Under Armour's goal is to generate 18% of its revenue from outside North America by 2018. It is still far behind Nike, which derives 49% of its revenue abroad, but the pace of international sales growth is impressive.

Direct-to-consumer
In 2005, Dick's Sporting Goods and The Sports Authority accounted for approximately 36% of Under Armour's revenue. Today, The Sports Authority is in danger of bankruptcy, and Dick's Sporting Goods is seeing slowing growth.

The struggles of brick-and-mortar retail have been well documented, and the success of many retail brands is becoming more dependent on the transition to an omni-channel strategy. Under Armour has done a nice job of reducing its dependence on traditional retail channels.

The company appears to have plateaued its direct-to-consumer business at 30% of overall revenue, but the growth in direct-to-consumer revenue is still on fire.

Metric

2012

2013

2014

2015

Direct-to-consumer growth

34%

33%

32%

27%

Mobile visits also account for almost 50% of traffic to the Under Armour site, and the company hopes to expand its digital presence with Connected Fitness, the world's largest digital health and fitness community. Last year, approximately 150 million users of Under Armour's fitness applications logged two billion activities -- data the company hopes to utilize to better understand consumers and boost sales.

Under Armour's revenue came in at $4 billion in 2015. At $32 billion in revenue for Nike and $18 billion for Adidas, Under Armour has a long way to go in catching up to its most formidable competitors. However, continued momentum in its footwear, international, and direct-to-consumer businesses will help close that gap in the coming years.

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The 3 Most Important Growth Drivers for Under Armour Inc

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In its twentieth year in business, ( Under Armour NYSE:UAA) has a come a long way from the niche company that sold moisture-wicking shirts targeted at football players. Today, depending on the ups and downs of the stock market, Under Armour is either the second or third largest sports apparel and footwear brand.

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Under Armour ( UA) has been one of the best growth stocks this decade. Indeed, the fitness-apparel name has been on a tear over the past five years, appreciating almost tenfold in value, as the bottom line has leaped ahead at an annual rate of about 25% and the company has branched out into footwear and other large product categories. The shares now appear fairly expensive, however, at least on a price-to-earnings basis. This has Wall Street's sell-side analysts sounding a cautious note. Should individual investors follow their lead and take a pass on UA stock at this time? Or will the explosive growth continue for several more years to come, rendering this a worthwhile entry point? In this brief article, we will attempt to address these questions by taking a look at Under Armour's business and performing an easy-to-follow SWOT analysis of the company, evaluating its Strengths, Weaknesses, Opportunities, and Threats.
The Business
Baltimore, Maryland-based Under Armour, founded in 1996 by CEO Kevin Plank and public since late 2005, started out as a maker of compression t-shirts and gradually evolved into a global designer and distributor of high-performance athletic apparel, footwear, and accessories. Most of the top line, which amounted to $3.1 billion in 2014, comes from the domestic wholesale channel, with Dick's Sporting Goods ( DKS) representing its largest customer. But Under Armour, which continues to diversify its business, also licenses its brand and sells its products online and directly to consumers through a collection of outlet stores. And overseas expansion is becoming a priority, with sales outside of North America currently around 9% of the total mix.
Strengths
Runaway Growth: Under Armour has established quite a track record since going public a decade ago, when sales were less than $300 million and the company was not even on the radar of large sector players like Adidas ( ADDYY) and Dow component NIKE ( NKE - Free NIKE Stock Report). Over this span, profits have soared in excess of 20% annually, and the top line has steadily risen to past the $3 billion mark. And Under Armour recently beat out Adidas for the No. 2 spot in terms of domestic sportswear sales. Growth has been supported by an effective leveraging of the core sweat-wicking apparel (that first put Under Armour on the map), much the same way NIKE leveraged its early prowess in running shoes to expand into broader apparel and athletic categories. Plus, the company has used a winning strategy from NIKE's playbook: ink long-term marketing deals with up-and-coming sports personalities.

Trendy Advertising: Two such marketing agreements that have yielded big returns lately include one with Stephen Curry of the Golden State Warriors (who just won the NBA title) and one with Jordan Spieth (winner of the Masters and U.S. Open golf tournaments). These advertising partnerships, along with new social and digital campaigns and long-standing tie-ups with the likes of football great Tom Brady and pitching ace Clayton Kershaw, are helping Under Armour maintain its "cool" factor with influential young consumers. What's more, they should enable the company to further broaden its product portfolio going forward. While Under Armour's ten-year track record is quite impressive, it still has plenty of room to expand around the world. (Note that market leader NIKE maintains a sales base fast approaching $30 billion.) This is particularly true in areas such as basketball and golf gear, where the company currently has only limited exposure.

Bright Outlook: Despite spending pressures (discussed below), initial dilution from some recent acquisitions, and foreign exchange headwinds that are causing problems for many multinationals, we still think that earnings can reach the $1.10-a-share mark in 2015, on a 20%-plus revenue increase. And a sharper bottom-line charge is likely next year, with profits apt to approach $1.50 a share. By then, the currency situation should be a bit better, and margins ought to widen as Under Armour leverages its infrastructure investments.
Weaknesses
Heavy Investment Spending: One has to look closely to find weaknesses here (there certainly has been nothing weak about the stock price), but the high level of investment spending is at least a modest cause for concern. The expenditures are needed, to be sure, not just for endorsement deals but also for product innovation, IT and supply chain upgrades, and overseas expansion. The cash outlays mean that a quarterly dividend is probably not in the cards anytime soon, however, which may be a turnoff to some income-oriented investors. Additionally, the spending may curb Under Armour's future actions on the M&A front. That has not been the case historically, with the company, most notably, using acquisitions to shore up its online presence. Within the past few years, Under Armour bought the nutrition-tracking apps MyFitnessPal, Endomondo, and MapMyFitness (for a combined $710 million). These transactions ought to pay off by bringing more athletic, on-the-go consumers into the company's fold. Indeed, by tapping into large online fitness communities, Under Armour should be able to collect invaluable data on customers' habits and preferences, fine-tune its advertising message, and wrest further market share from rivals.
Opportunities
Footwear: Under Armour's share of the footwear market is fairly small, likely still in the low single-digits. That's a good thing, though, since it means that the company has a huge opportunity in this competitive sector. And we expect big strides to be made in the years ahead (sales growth of 30% a year seems reasonable), which should help Under Armour gain ground in key international geographies and underpenetrated sports realms, such as golf, tennis, basketball, and soccer. (Thus far, most of the footwear gains have been in the running space.) Product innovation should support market-share advances, as the company has already established a good record of rolling out new performance-oriented sneaker designs at regular intervals. What's more, we see Under Armour's expanded footwear lines making inroads with leading wholesale distributors, including Foot Locker ( FL) and Finish Line ( FINL).

Direct-to-Consumer Distribution: While the company has earned its stripes in the domestic wholesale channel, it's been expanding its retail presence in recent years. This has mostly involved the opening of factory outlet shops that let the company clear its inventory position and reach untapped rural and suburban U.S. markets. Yet, ecommerce, roughly 8% of the top line, is now becoming more important to Under Armour's direct-to-consumer strategy. And we look for the company to open more outlet shops overseas, in places like Europe and Latin America. This will not only help Under Armour to better manage its inventory (and keep retail prices high), but it should also help it to build greater brand awareness abroad, something that is critical at this stage in the company's history.

Overseas Expansion: With Under Armour growing at such a blistering pace, it is constantly seeking ways to enlarge its addressable market, so as to ensure continued success. A big way to do this is by moving overseas, which is why the company is building out its network of factory outlets. (The overseas sporting goods market is estimated at $130 billion.) UA has also reshuffled the international leadership team, hired marketing consultants in select regions, and taken back control of product sales and distribution in many countries. These efforts ought to pay off handsomely during the latter stages of the decade, and ultimately add another $1 billion or so to revenues.

Women/Children: With the majority of sporting goods sales to men, industry participants are always endeavoring to widen their demographic reach to include more women and children. Under Armour, for its part, has made a lot of headway in the women's apparel segment, improving the quality and styles of its collections and signing up high-profile endorsers like model Gisele Bundchen. The company is also targeting kids more than ever, increasing its SKUs in this small but important category. Such initiatives should further enhance the company's growth profile over time.
Threats
NIKE: There are always risks when you take on an entrenched industry leader. And such is the case when Under Armour takes aim at NIKE, which has a huge war chest (of nearly $6 billion in cash assets) and a dominant global position. NIKE could exert its power in many ways, from outbidding the company for endorsement deals to securing cheaper sourcing plants in emerging markets. Thus, Under Armour will need to stay creative in its approach. And it will need to avoid appearing too "corporate" as it becomes more successful. This is a tag that has often been put on NIKE.

Poor Endorsement Decisions: The company's bets on up-and-coming athletes have mostly paid off, especially its recent ones with Mr. Curry and Mr. Spieth. Predicting future sports stars is far from an exact science, however, so we would expect a reversion to the mean over time, with some endorsement contracts turning out to be busts. This could prompt Under Armour to go after more proven, household names in the sporting world (e.g., Mr. Brady). But such a strategy would almost surely be costlier. And, again, the company would then have to vie with NIKE, which has shown little hesitation to opening its deep pockets in order to sign top talent.
Conclusion
All in all, the Under Armour story is extremely compelling, with the company's strengths and opportunities easily outweighing its weaknesses and threats, in our view. So that brings us back to the valuation question: is the stock too expensive to recommend at this juncture? The shares certainly don't look like a bargain, trading at roughly 75 times this year's consensus earnings estimate. Still, the stock could start to look a lot cheaper quickly if earnings can maintain their current momentum. And that's what we envision happening in this case, with profit growth even likely to accelerate out to 2018-2020. Thus, we still like UA shares as a long-term play. Investors waiting to get in at much lower prices may find themselves relegated to the sidelines while this well-run apparel maker continues to forge ahead.

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ua; under armour; nike; athletic; kevin plank; tom brady

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Under Armour (UA) has been one of the best growth stocks this decade. Indeed, the fitness-apparel name has been on a tear over the past five years, appreciating almost tenfold in value, as the bottom line has leaped ahead at an annual rate of about 25%.

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Last month, I (( wrote about how I believed a 20% drop from recent highs presented a buying opportunity in Under Armour NYSE:UAA) NYSE:UA) shares. With 24 consecutive quarters of 20%-plus revenue growth, a founder-CEO at the helm, and an aggressive move into Connected Fitness, its digital technology suite of health trackers and mobile applications, I believe Under Armour is in a position to provide shareholders plenty to cheer about over the long-term.

However, no investment is without risk, and Under Armour is no exception. Let's take a look at some of the biggest risks to its business.

Departure of Kevin Plank

Much of Under Armour's recent stock decline can be attributed to the departure of two key executives. The chief merchandising officer position is temporarily being backfilled by the current chief marketing officer, Kip Fulks, while the chief digital officer role will be taken over by MyFitnessPal co-founder Michael Lee. There will likely be some bumps in the road as the leadership team works through the transition. However, in the long run, the moves are unlikely to have a large impact on the company as both positions can be filled by experienced and competent leaders. However, if founder and CEO Kevin Plank were to leave the company, that bump in the road would be more like a mountain.

In 1995, CEO Kevin Plank created a T-shirt that wicked away moisture for his former football team at the University of Maryland. After perfecting the design, he began selling those T-shirts out of the back of his trunk, and 20 years later, he has led Under Armour in developing a $17 billion business.

A recent study by Harvard Business Review found that returns to shareholders of companies that are currently led by their founders are three times higher than those of other companies. The top performers have a founder's mentality, which management consulting firm Bain & Company defines as "behaviors typically embodied by a bold, ambitious founder -- to restore the speed, focus, and connection to customers."

Since its IPO in 2005, shares in Under Armour are up over 1,120%. To safeguard Plank's ability to maintain a founder-led culture, the company recently split its stock in a way that will ensure majority voting power remains with its dynamic CEO. If for some reason Kevin Plank were no longer leading the company he founded, investors would be wise to consider parking their investing dollars elsewhere.

Connected Fitness flops

Since 2013, Under Armour has spent nearly $1 billion acquiring three fitness and activity apps. The purchases of MapMyFitness, MyFitnessPal, and Endomondo are a part of Under Armour's strategy of connecting with customers and increasing awareness and sales through its wholesale and direct-to-consumer channels.

Under Armour intends to leverage the data from its 160 million registered Connected Fitness users to boost engagement and monetize these apps. The company is off to a good start in terms of growing its digital business. In its most recent quarter, revenue in its Connected Fitness category grew 119% to $18.5 million. Still, while Connected Fitness makes up less than 2% of the overall business, its absence would have resulted in an increase of 47% in overall operating income. In the first quarter of 2016, Connected Fitness' contribution to operating income was a loss of $16.5 million.

Under Armour is still in the early innings of its investment in digital fitness. As the business matures, investors should look for increasing returns. If the business continues to shrink company margins, investors may need to think twice about this strategy.

Supply chain doesn't improve

Under Armour's inventory growth for the first quarter of 2016 came in at 44%, well above revenue growth of 30%. This marked the third consecutive quarter that inventory grew faster than revenue. This is a concern, particularly for retailers, as excess inventory is typically followed by deeper discounting to clear shelves for newer products.

In Under Armour's defense, management did put investors on alert that inventory levels will increase. In a presentation to investors in September 2015, COO Brad Dickerson had this to say about increasing inventory:

First, on the near-term -- over the course of the rest of this year and through 2016, we are focused on delivering our products to our consumers more timely, specifically on key seasonal floor set dates. This focus specifically in comparison to some prior years' challenges will result in elevated inventory growth rates over this time frame to flow product earlier.

Longer term beyond 2016, many initiatives are under way which should bring added efficiencies to how we manage our inventory. These initiatives are focused on how we plan and deliver our seasonal products.

I do give Under Armour a pass on consistently growing inventory faster than revenue for the remainder of this year. Management is making a strategic decision to improve service levels. However, the words "prior years' challenges" should be heeded. Under Armour has had inventory issues in the past, which have led to lower operating margins. Over the last 12 months, the leaner and more efficient Nike has delivered profit margins of 11.8% versus Under Armour's 5.7%.

To help improve its supply chain, Under Armour announced that it is working with software maker SAP over the next three years to provide an integrated enterprise resource planning solution across all of its business lines. This investment should lead to "getting the right product in the right place at the right time."

If management unable to improve inventory management, the investment thesis in Under Armour may be at risk. Today, the story at Under Armour is revenue growth. However, over the long run, that revenue growth must translate to the bottom line.

Under Armour has been a tremendous investment over the past decade. It is very easy to think that its past performance will carry forward. This may very well be the case, but investors would be well-served by keeping tabs on these risk factors.

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The 3 Biggest Risks to Under Armour Inc's Business

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Last month, I (( wrote about how I believed a 20% drop from recent highs presented a buying opportunity in Under Armour NYSE:UAA) NYSE:UA) shares. With 24 consecutive quarters of 20%-plus revenue growth, a founder-CEO at the helm, and an aggressive move into Connected Fitness, its digital technology suite of health trackers and mobile applications, I believe Under Armour is in a position to provide shareholders plenty to cheer about over the long-term.

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Why Adidas is outperforming Nike, Under Armour

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German sportswear maker is back on track.

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Much of the ad is dark. It shows US Olympian Michael Phelps swimming, and his grueling workouts outside the pool and international competitions. The ad's theme, and its tag line, are this: "It's what you do in the dark that puts you in the light."

As of this writing (Aug. 15), the ad, created by Under Armour, has been viewed on YouTube more than 10 million times, and received at least a little hyperbolic press. Last week, AdWeek reported that data from Unruly, a platform for social video advertising, now places the ad as the second most shared of the 2016 Olympics, and the fifth most shared Olympic spot ever-even though it debuted months ago, and doesn't mention the Olympics once.

The ad, part of Under Armour's "Rule Yourself" campaign, is an undeniable victory for the company. The games offer an unrivaled marketing opportunity for makers of sporting goods. Under Armour, which has its biggest presence at the Olympics ever this year, both in advertising and in the nearly 250 competing athletes it sponsors, has capitalized quite effectively.

The spot, which won a top prize at the 2016 Cannes Lions International Festival of Creativity in June, shows Under Armour smartly leveraging a change in the Olympics' marketing rules that are making their debut this year. Previously, under so-called Rule 40 (pdf), the International Olympic Committee (IOC) prevented athletes and brands that weren't official sponsors of the games from even mentioning an athlete's performance for any sort of promotion. During the 2012 London Olympics, for instance, Virgin Media had to pull its ads featuring Jamaican sprinter Usain Bolt. Under Armour similarly couldn't promote its relationship with Michael Phelps, who had first signed with the company, based in his hometown of Baltimore, two years earlier.

The rule has been unpopular with athletes and smaller brands, such as Brooks Running. For most athletes, it's financially difficult to finance their participation at the games and many want to use them for advertising opportunities. Last year, the IOC slightly loosened the restrictions of Rule 40, allowing brands to run "generic" ads that feature athletes as long as they debuted six months in advance of the games. Under Armour is exploiting the change, which may allow it to reach new customers overseas.

The ads aren't Under Armour's only Olympic marketing success. Since early 2013, or about six months after the 2012 London Olympics ended, Under Armour has provided uniforms and other apparel for US gymnastics, and it's been rewarded with the logo appearing prominently during the team's widely watched routines.

These efforts could bring Under Armour more exposure than many of the games' official sponsors. It's a strategy that Nike pioneered, and this Olympics, it's been golden for Under Armour.

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The moving Michael Phelps ad that has been gold for Under Armour at the 2016 Rio Olympics

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Much of the ad is dark. It shows US Olympian Michael Phelps swimming, and his grueling workouts outside the pool and international competitions. The ad's theme, and its tag line, are this: "It's what you do in the dark that puts you in the light." As of this writing (Aug.

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source

Christian Petersen/Getty Images

Under Armour made another splash in the golf world when they introduced their first line of golf shoes this week at an event leading up to the WGC-Dell Match Play in Austin, Texas. For the rising sports apparel and footwear company, it may be their boldest move yet, but it is one they are approaching with a careful and calculated approach that may help them succeed where Nike has not.

Ryan Kuehl, Under Armour's vice president for sports marketing and sponsorships, explained in an interview with Business Insider how they are trying to win over the golf consumer and it is brilliantly simplistic.

"We are sticking to what we know," Kuehl said. "What we are doing right now is sticking to the apparel and the footwear. Consumers and athletes know that we are a very strong apparel and footwear brand."

Of the major sports, golf may be the most difficult for a new brand to become established. It is a sport where both the athletes and the consumers are intensely loyal to long-established golf brands, something Nike learned the hard way. Despite being the world's biggest sports shoe and apparel company, and despite having Tiger Woods as a spokesperson, Nike still lags behind several other traditional golf brands.

"The golf consumer can smell a rat," Kuehl said when asked what the biggest challenge is for Under Armour Golf. "We've got to talk like a golf brand. We've got to act like a golf brand. We've got to behave like a golf brand. And we have to build products like a golf brand for us to compete.

The anti-Nike.

Under Armour's strategy is clearly different than the tactic used by Nike in the early 2000s when they launched a full-fledged assault on the golf world, not only with apparel and shoes and trendy commercials, but also with golf equipment like clubs and balls.

Unlike Nike, Under Armour is in no hurry to start making golf equipment.

"I wouldn't say [making golf equipment] is out of the question, but it is not anytime soon," said Kuehl. "We are very happy with where our product portfolio is right now."

This is a point Under Armour cleverly emphasized in their first commercial for Jordan Spieth's new shoes. The very first thing seen in the commercial is a golf ball, with a Titleist logo front and center. Instead of moving into the neighborhood and building up a big wall to block the neighbors, Under Armour knocked on their door and offered a plate of warm cookies.

Under Armour's huge advantage - technology.

While Under Armour strives to be accepted as a golf brand, they still have some huge advantages over other golf apparel companies. One of the biggest is the one thing that made Under Armour famous, apparel technology.

"Under Armour is ahead of Nike in terms of how they are integrating technology into their proposition," Neil Saunders, CEO of consulting firm Conlumino, wrote in an email to Business Insider.

This is important because Under Armour can be taken seriously when they sell golf as a sport instead of a pastime. Portraying golfers as athletes is something that will likely resonate better with younger consumers, the same consumers that have been moving away from golf in recent years.

Under Armour's other huge advantage - a younger core

This is also an area where Under Armour's beginnings are a big advantage. The same kids who were wearing Under Armour apparel as high school athletes in the mid-2000s are now young professionals looking for other ways to be athletic.

"That kid who first knew us at 15 or 16 playing high school sports, you go forward 10-12 years, now they are out of college, they're starting a career, and they still know our brand," Kuehl said. "So they are very comfortable taking our brand and wearing it on a golf course."

At the same time, Under Armour's attempt to become part of the golf world and still stand out without scaring the traditionalists can be seen in the simplicity of the products they are producing, eschewing bright colors, oversized logos, and splashy designs seen on products produced by Nike and Puma.

"We want to make stuff people will wear," Kuehl said. "If you were to look in your closet at all the golf shirts. Let's say you have 15 golf shirts, 12 of them are probably some version of blue, black, grey, or white...maybe you have a red one, a green one, maybe a purple one, but basically it is blue, black, grey, or white."

Under Armour is starting at the bottom, literally.

That Under Armour is making a big leap into golf through footwear is no surprise. The company is taking aim at Nike and sees the rise to the top as starting from the bottom, as Adrienne Lofton, Under Armour's Senior Vice President of Global Marketing, recently explained to Business Insider.

"There's a major opportunity for Under Armour to own footwear," Lofton said. "We started in apparel and we started in sporting goods. The opportunity is to continue from the toe up, and enter new channels of distribution through the opportunity of footwear."

If Under Armour is going to succeed in footwear, that means taking on Nike.

source

Emmett Knowlton/Business Insider

For now, being the biggest brand in golf is probably not important to Under Armour. Rather, Kevin Plank, the CEO and founder of Under Armour, would probably just be happy if Under Armour grows bigger in golf than Nike and accepted among the traditional brands.

So far, they are off to a good start.

Here is the full commercial for Under Armour's new shoes.

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Cork Gaines, Business Insider US

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Under Armour has a brilliantly simple strategy to do something Nike has been unable to do - conquer the golf world

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source Christian Petersen/Getty Images Under Armour made another splash in the golf world when they introduced their first line of golf shoes this week at an event leading up to the WGC-Dell Match Play in Austin, Texas.

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It's fair to say Jatia is a confident man. Within minutes of sitting down with Marketing Week, he boasts about President Obama rocking Under Armour sportswear and his confidence Under Armour can hit a $10bn (£6.8bn) valuation by 2020 (it is currently worth almost $4bn).

But his confidence is more than merited. The sports brand has been disrupting the market for sports apparel with 23 consecutive quarters of growth. Most recently sales were up by 31% to $1.17bn (£800m) in its fourth quarter.

And in the US market, Jatia claims there has been a "changing of the guard".

"The younger generation is super enthusiastic about the brand. You go into schools and everyone is wearing us so that gives us a lot of confidence about the future. Nobody wants to wear Nike anymore because it isn't cool - it's in the discount houses, it's everywhere. People like the underdog and engage with our story," he explains.
READ MORE: Under Armour expects Apple to come calling as sports apparel and tech worlds collide
Adopting a 'patient' sponsorship strategy

Central to Under Armour's growth has been signing up athletes before they hit superstardom. Rather than go straight for the big names, Jatia says it is reaping the rewards of a "more patient" strategy.

He also claims big-name athletes no longer want to be associated with Nike or Adidas and prefer to align with sports brands that stand purely for performance. Andy Murray, for example, left Adidas to sign a four-year sponsorship deal with Under Armour.

"We do a tonne of scientific research over how an athlete can perform over the next five to 10 years, there's a team dedicated to it," Jatia reveals. "We then make a judgement call. Tottenham were like sixth when we signed them up, now they are second in the Premier League. Golfer Jordan Spieth was ranked number seven in the world and he's now the champion. Nike passed on [basketball player] Stephen Curry and went for Kevin Durant as he was the obvious posterboy. We got Curry and now he's the hottest thing in the NBA."

The growth journey of Under Armour athletes is also reflected in its marketing. Its 'Rule Yourself' campaign features the slogan 'It's what you do in the dark that puts you in the light' and shows young footballer Memphis Depay.

Jatia explains: "We are firm believers in athletes overcoming the odds and we only sign up stars who can fit into that messaging. They have to reflect the journey the brand is going on. Being the underdog and growing to be the best."

Building a fitness community

Under Armour has a fitness community of 165 million users, following high profile acquisitions of sports-focused tech brands such as MapMyFitness and MyFitnessPal, and one in four Americans now uses one of its fitness apps. Last year, Under Armour also inked a partnership with HTC resulting in a family of fitness wearable devices developed under a new sub-brand, Healthbox.

Jatia says the community is a "social channel" in itself that the brand will make increasing use of. The focus is on linking engagement with commerce so that when users reach fitness goals the brand can notify them of purchase opportunities to aide their progress.

"Most of the time when we are on those wearable platforms, you are in a lean forward position. You put your sneakers on and go out. The challenge is creating moments that are more lean back. Can I engage them when they crush their personal best, can I send a follow up email saying 'Here is a reward'," he asks.

While devices offer an opportunity to engage with consumers, Jatia says they can also be profit drivers, although he admits the margin for consumer electronics is less than for apparel or shoes. "It's all about scale. If we sell enough hardware, we can make up the margin."

Jatia believes tying the two businesses together through connected shirts and shoes are the future of sports brands. He says the apparel and tech worlds will inevitably collide, and when they do he expects Apple to come calling.

"Why can't you have a shirt with a temperature control built in? You can put in a thermostat warmer or cooler to aide a workout. It would mean you don't need to run an expensive heating system in the home either; you're wearing it!" he explains. "Apple recently came out with the Health Kit for developers so it is clearly becoming a big part of their strategy. It could make good sense for them to work together with Under Armour, or to combine."

Taking a localised approach

While Under Armour has seen success in its home market, Europe and China are still relatively small for the brand. The UK, in particular, is a "work in progress" according to Jatia. But rather than just recycle its US strategy, he says Under Armour will adopt a localised approach.

Pointing to recent contracts such as its new sponsorship with Southampton FC and its work with the Welsh rugby team, Jatia claims Under Armour is moving in the right direction. He also says sports leisurewear, particularly for women, will also be "central" to its growth plans.

He explains: "There is a different sensibility in Europe about what they care for than in the US. As we evolve in other countries, the vernacular has to be extremely laser focused around that country. It can't be just about marketing the US clothes in Europe or China.

"We need to look at local assets and tap into the fervour of that particular country. The Welsh rugby team is a classic example as while it isn't super visible, it is one of the most emotionally charged teams in UK sport."

Jatia also is not concerned about a resurgence from Adidas. This despite the fact that Andy Murray was pictured wearing Adidas shoes at the US Open last year, promoting Adidas to tweet a picture featuring the words "You can choose armour or you can choose a weapon'.

"As we continue to overtake them in the US, Adidas feel like they are spiralling out of control."

Sid Jatia, VP of omnichannel at Under Armour

He adds: "We have this big fitness community and are building great products so Adidas is desperately copying us. They just went and acquired Run Keeper. But it won't work. We're not trying to get Kanye or have our hands in too many pots, that creates confusion. The number one brand message for us is simply being health conscious and that is why we matter.

"We might be in our infancy in the UK, but it is a market that has the same hunger for health and fitness that we've seen in the US. We know how to build an engaged fitness community and there's the potential to mirror our US growth in Europe and China."

With confidence like that, don't expect the Under Armour train to derail anytime soon.

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How Under Armour plans to become the world's biggest sports brand

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Having overtaken Adidas in the North American sportswear market, only Nike now stands ahead of Under Armour. And its VP of direct-to-consumer and omnichannel digital Sid Jatia is confident the brand, which now houses high-profile athletes including Andy Murray, can replicate its success this side of the Atlantic.