Wall Street slammed Under Armour’s stock yesterday (Oct. 25), serving the American sporting goods maker its biggest hit in more than seven years. The market reaction came after Under Armour said it would not meet the growth target it laid out about a year ago, and projected sales to increase in the low to 20% range through 2017 and 2018. That forecast would be enviable for many businesses, but it marks a slowdown for Under Armour, which has enjoyed a sustained growth spurt for years.
“Is it fair?” CEO Kevin Plank asked at WWD’s Apparel & Retail CEO Summit in New York today. “Life’s not fair, right?”
Plank pointed out that Under Armour has delivered 26 consecutive quarters of more than 20% revenue growth. He also recalled the one time in the company’s 11 years since going public that it missed an earnings estimate, several years ago. At the time, an analyst asked Plank, “So did you lie to us? Or are you too dumb to know the difference?”
Plank recalled laughing at the audacity of it, and relayed to the audience a text message he got then, and again yesterday, from Ed Stack, CEO of Dick’s Sporting Goods, Under Armour’s biggest customer. “Kevin,” it said, “some days you’ll find you’re the bug, and some days you’ll find you’re the windshield. Good luck.” Plank said it was worth consideration by any company contemplating going public.
“I enjoy being a public company,” he said, emphasizing that a 50% increase in sales growth over two years is still a “pretty big deal.” But he also said the costly investments the company is making extend beyond that time frame, so a bit of caution even in the face of double-digit-percentage sales growth is not as absurd as it sounds.
Meanwhile, the intensity of the competition in Under Armour’s business suggests there’s little room for error.
Right now, Plank can take comfort that the trends in fashion are squarely on Under Armour’s side. People are dressing more casually both outside the office and in, and seeking comfortable, stylish, functional clothes—and that’s a specialty Under Armour has honed over the course of its 20-year existence, since before “athleisure” became a major fashion trend.
Under Armour believes it can deliver through its main brand and ancillary efforts such as its new fashion-focused label, UAS, designed by Tim Coppens.
“We see this massive opportunity in lifestyle,” Plank said at the WWD summit, pointing out that Nike and Adidas do a combined $15 billion in sportswear sales.
The summit, incidentally, took place just steps away from a giant symbol of Plank’s ambition—Under Armour is set to take over the former FAO Schwarz space on Fifth Avenue in New York, where its neighbors will be Apple, Bergdorf Goodman, and Cartier.