I've been bearish on Under Armour (UAA) (UA -0.15%) for a long time. In recent articles, I discussed the company's biggest mistakes, its vulnerability to tougher competitors, and CEO Kevin Plank's worst moves. But today, I'll reexamine the bull case for Under Armour by looking back at the company's three smartest moves in the first half of 2017.
1. Realizing that it wasn't fashionable
During a conference call in January, Plank admitted that Under Armour needed "to become more fashionable" to compete more effectively in the "athleisure" market. UA's softness in the athleisure market -- which is dominated by companies like Nike (NKE 0.66%), Adidas (ADDYY -0.47%), and Lululemon -- caused ongoing declines in its North American market, which accounts for nearly 80% of its revenue.
Image source: Under Armour.
Plank's epiphany wasn't a game-changing one, but it indicated that he finally realized that UA needed to revamp its fashions to survive.
2. Sending the Curry back to the drawing board
UA's design problems were apparent in its flagship Curry shoes. Last year, the "Chef" version of the Curry 2 Lows were widely mocked as "nurse" or "dad" shoes. The Curry 3 received better reviews, but sales still came in below the company's expectations.
The Curry 4. Source: Under Armour.
That's why UA went back to the drawing board with the Curry 4, which looked dramatically different from previous versions. Maxim recently called the Curry 4 "Curry's coolest sneaker yet," and claimed that they were "on par with anything" coming from Adidas' popular Yeezy brand by Kanye West.
The Curry 4 faces an uphill battle, but Plank claims that UA "yielded lessons" from the Curry 3's mistakes, which are now being applied "ahead with the Curry 4 and beyond." Plank also stated that UA "retooled" the number of colors, scarcity, exclusivity, and cadence of launches "to drive more consistent engagement and results" among consumers.
UA hopes that the NBA Finals, which ended with a Warriors victory on June 12, will lift sales of the Curry 4. However, some analysts note that the NBA Finals probably gave Nike's Kevin Durant a bigger boost than Steph Curry, since Durant was named the NBA Finals MVP.
3. The Rock's new shoes
The jury's still out on the Curry 4, but The Rock's new signature shoe, the UA Project Rock Delta, recently became a major hit for Under Armour. The $140 shoes sold out quickly after its initial launch in April, and became UA's fastest-selling shoe of the year.
The Rock Delta differs from UA's other "celebrity" shoes because Dwayne "The Rock" Johnson oversaw the design process himself. In a statement, Johnson stated: "I've been putting in the sweat for over a year to design and engineer the best in-class training gear with our partners at Under Armour; training in literally every single piece of our collaboration until it passes the test and I'm satisfied."
UA's Rock Delta. Image source: Under Armour.
That's a move borrowed from Adidas and Puma: to let celebrities oversee the design of their signature shoes and launch them as premium sub-brands -- similar to Adidas' Yeezy and Puma's Fenty.
UA's launch of the Rock Delta was smart on two levels: It mended some Trump-related wounds between The Rock, The Rock's fans, and UA; and it proved that Plank's "premiumization" strategy for certain high-end shoes could work -- even as it discounted its products across certain channels.
The key takeaways
I'm still bearish on Under Armour, due to its slowing sales growth, crumbling margins, and high valuation. But I believe that the bears should also be aware of the bullish catalysts on the horizon.
Plank's focus more on more fashionable looks and two new shoes might not seem like huge wins for Under Armour. But compared to the many mistakes UA recently made, these three moves can be considered its best decisions for the first half of 2017.
