Under Armour (NYSE:UAA)(NYSE:UA) officially launched Under Armour Sportswear (UAS) Thursday during New York Fashion Week. At the launch event, held in an industrial-looking complex in Manhattan, models showed off the new line "designed to artfully blend the worlds of sport and fashion" with bold looks such as boots with a "fat-tire" bottom and neoprene lining (shown on the second model in line above).
Designed by sports-fashion icon Tim Coppens, the line features plush styles with a more refined and fashion-forward look than Under Armour's other clothes. "Raw, tech-infused and rooted in sport," Coppens says in the company's release. The look of the line is not the only bold move the company is making, so are the prices it plans to charge for UAS apparel as well as its selective distribution strategy. If the gear is well-received at those prices, it could be a major opportunity for future growth.
UAS targets a new audience
In an interview at the event, Ben Pruess, Under Armour President of Sport Fashion who leads this segment, said that this is just the beginning -- he plans for many more lines to come with continued refinements to fit their target audience. So who is that target audience?
The line does include some pieces such as sweat pants and shorts, but Under Armour is quick to explain that this is not a play for the "athleisure" market. Instead, Under Armour is partnering with the entrepreneur-focused startup WeWork, as well as high-profile universities, to make UAS the gear of young professionals and "ambitious fashion-conscious MVPs off the field", according to the company.
UAS is not just aspirational in its design, its ambitious in its price points, which range from basic layering pieces at $59 to tailored coats at $1,500. Of course, with these prices, the gear will be less for the mass market of athletes that Under Armour currently serves and instead positions the company for the higher end young professionals market. Under Armour gear has been priced similar to its biggest competitor Nike, and this new line could help Under Armour to increase its margins in a way that it wouldn't be able to otherwise.
How Under Armour plans to maintain its brand image at both ends
Under Armour also announced earlier this year that it has partnered with department store Kohl's, which serves a more discount-focused audience. Under Armour clothes will go on sale at Kohl's stores in 2017, and so far, it appears that only more basic gear on the lower end of Under Armour's price range will be available at the department store chain.
If Under Armour is selling basic wear at a discount store like Kohl's, some analysts have already been questioning how Under Armour will then be able to sell this much higher-priced fashion line without diluting the brand image at both ends. Pruess said that with a new logo and distinct distribution, the company can effectively serve both markets. The UAS collection will not be available in most Under Armour stores, much less Kohl's. Instead, UAS will only be available at stores like Barney's New York, specific Under Armour stores in New York, Chicago, and Boston, and even a separate e-commerce site from the parent brand.
Where the brands will converge, however, is who promotes them. I asked Pruess if Under Armour plans for other celebrity endorsements outside of its athletes (such as the music artists and other celebrities that have been tapped for brands like Adidas and Skechers recently). He said that Under Armour's athletes have been some of the biggest proponents of stylish clothes to wear off the field, and they will be the ones promoting the line. NBA MVP Steph Curry posted a picture on Twitter the day before the event wearing UAS gear.
The UAS opportunity
Kevin Plank said during the most recent earnings call that "Our two competitors claim that their sportswear businesses are somewhere between 20% to 30%, so the aggregate number there is roughly $50 billion, so we assume there's about a $15 billion market opportunity that today Under Armour is playing just a few percentage points for overall growth."
Under Armour's new line is a major leap from most of its other athletic gear and one that comes with plenty of risks to the brand reputation and business model. However, this is not a company that shies away from risk. It made large investments to become the leader in the digital fitness industry, and previous success aggressively entering new categories has helped the company and its stock to grow as much as it has in the last decade.
It's too early to try and guess what success will look like for Under Armour Sportswear, or how it will evolve, but this is an interesting development for the company with significant challenges but also plenty of upside.
Seth McNew owns shares of Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Skechers, Twitter, Under Armour (A Shares), and Under Armour (C Shares). 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.