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Is Under Armour Costing the U.S. Olympic Medals?

Under Armour (NYSE: UA  ) is under fire this week as the U.S. speed skating team grapples with a flaw in their racing suit, which was designed by the sports apparel maker. Under Armour specially designed high-performance suits for the U.S. speed skating team and promoted the outfits as "a competitive advantage" heading into this year's winter Olympics, according to The Wall Street Journal. Unfortunately, the uniforms may be working against the racers.

Crumbling credibility
Members of the U.S. team worry that vents on the back of the suits may, in fact, be creating drag and slowing down the skaters. "One skater said team members felt they were fighting the suit to maintain correct form," the Journal reported.

The designer of the Dutch Olympic team's uniforms said he had tested a similar vent on the back of his team's suits three years ago, but he found that it "slowed his skaters by letting in air and creating drag," the Journal says.

Under Armour's senior vice president of innovation said the company would "move heaven and earth to make [the uniforms] better." Nevertheless, the damage this could do to Under Armour's brand shouldn't be understated.

After all, the reason Under Armour sponsored the U.S. Olympic team in the first place was to promote the technical fabrics and quality of its products. Today, that quality is being called into question for the entire world to see. NBC's coverage of the Winter Olympics opening weekend pulled in 26.3 million viewers according to Nielsen, not to mention the games' overall global reach.

Ultimately, this could be damaging to Under Armour's brand -- particularly because the company first promoted the outfits as "the fastest speedskating suits in the world ." Just look at what happened to athletic apparel rival lululemon athletica  (NASDAQ: LULU  ) after its very public quality control problems. If you remember, Lululemon was forced to recall more than 17% of its signature luon pants from stores last year due to problems with the material being too sheer.

On top of hurting Lululemon's brand image, the snafu cost the company as much as $67 million in lost revenue last year. Unlike Lulu's debacle, Under Armour's recent wardrobe malfunction won't necessarily hit the company's bottom line. However, it could hurt Under Armour's international aspirations.

Under Armour generated just 6% of its annual revenue outside of North America last year. The winter Olympics is a global event that attracts the attention of millions of viewers around the world. However, if this was meant to be Under Armour's big global debut, it's not speed skating its way to the top anytime soon.

The importance of branding
To be fair, Under Armour put significant thought into the design of the outfits. The company even put the suits through 300 hours of wind tunnel testing and brought in aircraft engineers and specialists from Lockheed Martin to counsel on the aerodynamic design. With the Winter Games now under way, Under Armour needs to quickly address the problem and reassure the public that its products are indeed fit for the world's best athletes.

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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9/1/2015 4:03 PM
UA $93.16 Down -2.37 +0.00%
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