Under Armour stock has struggled over the past few years, losing more than half of its value since its peak in September of 2015. Revenue growth has slowed from double digits to low single digits over the past few years and the company faced $1.3 billion in leftover merchandise in 2018. The company announced a turnaround plan in December of 2018 that promised to drive consumer engagement and grow the company's direct-to-consumer, footwear, and women's businesses.
Business Insider's Sara Silverstein sat down with Under Armour founder and CEO Kevin Plank and president and COO Patrik Frisk to get an update on the company's turnaround plan and find out what is coming next. Following is a transcript of the video.
Sara Silverstein: What are the biggest changes coming to Under Armour?
Kevin Plank: Thanks very much for having us here. It's great to be able to talk to your audience. Understanding how important the Business Insider view is is something that we get as a company that deals with and has a workforce that is incredibly young, incredibly proactive. And so for us, the message is just identifying, outside of the confines of an earnings call, we're just talking about where the company is. The transformation we've been on the last several years of the company, Patrick coming onboard, really helping us organize our structure, our processes, our systems and of course what our culture means for that, but really a brand that's moving from defensive to offense.
So that's where the brand really sits today is that in this lean forward aggressive stance of what are we going to do to really compete in this industry as the world's third largest athletic brand and really compete for continuing to drive for share.
Silverstein: And what are the offensive strategies that you have lined up?
Patrick Frisk: I think we've got several different ones. One, of course, the most obvious one, is innovation. We've got a stacked innovation pipeline in terms of what we're doing with our products going forward across both apparel and footwear. We're very excited about that.
The fact that we're going to turn on the volume for the brand as we turn the corner, '19 into '20, with that great innovation together with great messaging, that's really important to us.
Also some of the talent that we've been hiring lately like Stephanie [Pugliese], that comes from Duluth Trading. Great merchant, great professional, great proven leader but also a growth mindset to really go and compete in the marketplace like Kevin said.
Silverstein: And what are you hoping that she'll be able to do?
Frisk: I think bring stability to the leadership team there and also experience. She has been a sitting CEO for a public company. She understands end-to-end. She understands brand. She understands merchandising. She understands leadership and she has a growth mindset.
We're a growth company. We're going from defense to offense and we believe that that kind of a leader added to our already strong leadership team is going to be great.
Silverstein: And you have so much innovation in products but when it comes to way that you're selling your products, are you making changes there?
Frisk: Well, we're evolving our distribution model. Going forward, one of the things we talked about when we had an investor day about six months ago was going from 1100, 1200 full price stores around the world today to about 2500 in five years. That also includes North America. So building full price stores in North America we think is part of our strategy going forward but ultimately we're very focused on the consumer.
We call our consumer the "focused performer," somebody that has a competitive mindset in an active use occasion. What we want to do is provide them an opportunity to come somewhere where they can see the entire brand in all its glory, all the innovation, all the great messaging. And ultimately, our mission as a brand is to make you better. So we want to be able to do that more often with our consumer — providing them distribution points where they can do that is important to us.
More full price distribution in North America, better ecommerce experience, making sure we're in the right full price wholesale retailers. That's really what we wanna do going forward and that's our plan to do across the world as we move forward.
Silverstein: And what about ecommerce and direct-to-consumer? How are you going to increase that?
Frisk: Well, what we're doing is we're actually moving our entire company onto one platform globally and we've been experimenting with this for a little while now and we're really happy about evolving the way that the experience is for the consumer on our sites.
Plank: And loyalty is a huge part of that. Tie that into our 275 million plus digital health and connected fitness platform that we have, which is a monster for the business. MyFitnessPal, MapMyRun, two of the anchors that we use for that.
As we tap into that consumer, which is part of our app group that we have with again, still, talking about active, more than 80,000 downloads happening every single day. So we've got the ability for a brand new digital handshake with the consumer. Making sure that we're reaching them where they wanna be and how they interact, how they shop, how they utilize the brand is something that's a massive opportunity for us. We haven't unlocked that yet and I think as we do, that's one of the things we look at and say, "Look out."
Silverstein: And you have a lot of data on your consumers. Is that a real asset for you? What do you do with it? What have you learned from it?
Plank: One of the things we did was talked about, went from a head of apparel, head of footwear, head of accessories in our business to category management. So now we have nine distinct categories like running, like training, like basketball, where we have leaders on top that really allow us to get deep and close to that consumer — so in that breakdown, think about the data that we have coming in.
More than 12 billion foods will be logged this year. So every country on the planet will actually be logging in and telling us what they've eaten. Nearly a billion workouts, 400 million of which are runs. So in the running category, we can tell you empirically that the average run is 3.116 miles. Some people walk a mile, some people walk five but the data that we have as we continue to be able to tweak and unlock that is a super strength for us. We feel pretty confident about what that's going to mean for business.
Silverstein: And when you look at Nike and Adidas, how do you compete with people like that for shoes?
Frisk: Our mission as a company is that Under Armour makes you better. We believe that if we truly focused on the consumer, solving their problems, we're gonna be able to compete very well in this market going forward because we also believe that we've got the innovations to be able to do that going forward.
Plank: And where we are at this time, this is not a two- or three-horse race. This is a one-horse race. We need to focus on ourselves, which is exactly where we've been and when we deliver the right product for the right price at the right time. Take a look at our HOVR platform we introduced, our midsole cushioning system we introduced in footwear, take a look at our rush program that we've got in heat gear and now launching in cold gear here, just in the next month. This new IntelliKnit sweater that I'm wearing, Patrick in cold gear, so yeah, we wear the brand, we wear the jersey every single day so it's a massive opportunity.
Frisk: Yeah, I talked about that ecosystem. I think one of the unique things for footwear specifically that you asked about is truly being able to connect that footwear into your workout routine. About 40% of all the shoes that we sell today are being connected in our run category. So what people are able to do, they're able to get realtime coaching now. You don't need to bring your phone when you're running in our shoes and you wanna get coached. You'll understand your stride length, you'll understand your cadence, you'll understand how long you've run, you'll understand if you're getting faster, getting better.
Silverstein: And you have a very specific consumer. Is that why you have stayed away from athleisure?
Frisk: Yes, we made a decision, a very, very conscientious decision about a year and a half ago after a lot of research around the world that this brand is going to be precision and athletic performance. The reason for that is that we believe that that's where we're adding value. If you're a company that has a mission, that Under Armour makes you better, that's very clear. But I also believe that as you think about the athleisure market versus the athletic market, I think people have got it wrong. We don't separate between the two, 'cause we understand that our consumer wants something that is beautiful, that looks great.
Plank: I keep these whiteboards in my office and they have things that —
Frisk: I know all about those.
Plank: Dictate the culture of the company, which is, like, overpromise and deliver, walk with a purpose. Done, done, done. And there's a difference between them. One of them says that without beauty there is no performance.
So our goal is that when you see or feel our brand, it's saying, "Kevin, that's a cool sweater, what is it?" I say, "Well, it's Under Armour, of course." And the next question out of your mouth should naturally be, "Well, what does it do?" If you're not asking that, what does it do, because this is IntelliKnit, this is the same product that we've actually built into the spacesuits that we partner with Virgin Galactic that are going up to space in just a few months and again, all the astronauts and the pilots will be wearing this too because it's got graduated compression. It's got this holy grail. It can repel air from coming in but it also allows your body to breath. So that kind of innovation is Under Armour and it should be super cool and it should look great. So there isn't a, "Do you want style or do you want performance?"
Silverstein: And you're looking longterm now. What's the hardest thing about thinking longterm as a publicly traded company?
Frisk: I think in anything you do today, if you're large in scale you've gotta think longterm because ultimately you're making decisions of course about investments but also about innovation. We're using the insights that we get from the consumer today to really help drive our innovation engine. That in combination with our athlete insights — we have thousands and thousands of athletes that we work with that are providing us information about innovation.
It takes time to get innovation to market so you've gotta make sure that you have a go-to-market where you're able to put that innovation into the machine, so to speak. And today with sourcing strategies and other things becoming more and more important, if you're not looking longterm, you can easily get caught off-guard.
Silverstein: Is there anything that investors or analysts say that you feel like they really misunderstand? Is there one thing that really gets to you?
Plank: I think this is a company, it's all on the come. I think that's what people don't understand, is when you look to the transformation we've been through. This is strong entrepreneurial upstart company built and driven by a lot of momentum and then it was, "All right, how are you shifting into actually being a large-scale format company?" So what comes with that, the last few years, a lot of people have had opinions about what does it mean to make that transformation.
Still, if I look back at this chapter, '17, '18, '19, we'll have grown this company more than half a billion dollars over that time, implemented a new go-to-market strategy, implemented a new global operating model, get away from a North American company that's selling product other places, upgraded our systems, really retooled our entire management team and said, "Who's here and who's ready," brought in our president and chief operating officer, just watching all that synergy come together.
For me it's been great but it is human. So those are the things that come out and say, "Yeah, I don't know if it'll always look smooth on the top," but it means that we're moving forward.
Frisk: And I think from my perspective, being still the new boy on the block or not a rookie anymore, I'm past that stage, I think, but thinking about the fact that this is now the third largest athletic brand in the world, having done that, having grown that fast underneath of two really large brands, that's incredible. They were never able to do that. We've been able to do that. So now that we've got our stuff together, now that our innovation pipeline is stacked, now that we're going from defense to offense, now that we're gonna become a louder brand, I'd bet on us.
Silverstein: And tell me about your partnership. What's the strongest and hardest part about working together?
Frisk: The strongest and hardest part…
Plank: It's human.
Frisk: Having been here for two years now I think we know each other really well. I have incredible respect for what Kevin has created here and the fact that he's entrusting me to help him get to the next level with this amazing brand that we both want to be eternal. It is a partnership. It's like a marriage in some ways. You gotta respect each other. You gotta understand what drives each other, what both the strengths are from both sides and I think what's really unique about our brand, our company, our future, is the fact that you've got the yin and yang here to some extent in terms of Kevin's enormous entrepreneurial drive, understanding of brand, understanding of the merchandising capability of a great brand, with some of the stuff that I've done in my past, which is also driving big brands, understanding brand, but also having the operational experience to be able to really help us get to the next stage.
Plank: That yin and yang has been critical but we work at it. We make sure we sit down and we'll see each other throughout the day but we'll have sit-downs at least twice a week. We'll do a blowout session of two, three, four hours once a month and just make sure that communication, overcommunication — because it is, it's meeting where you find the strength and diversity that comes together. We like a lot of things but we can mix it up, too. This is, it's strength.
Frisk: You've gotta be able to do that and then walk out of it and be a lion at the end of the day.
Plank: Never go to bed angry.
Frisk: Nope, never go to bed angry.