Sports Apparel

Under Armour, Mi Amour

People work out at the Under Armour booth as the company promotes the Health Box, a Connected Fitness system, during the 2016 CES trade show in Las Vegas, Nevada January 8, 2016. REUTERS/Steve Marcus
Retailers are over the moon about Under Armour.
  • Why it matters

    Why it matters

    Germany is playing a fundamental role in Under Armour’s global expansion plan.

  • Facts

    Facts

    • Many German retailers are dissatisfied with global market leader Nike and its rival Adidas.
    • Under Armour is hoping to sign more sponsorship contracts with German sports teams.
    • In the first quarter, Under Armour’s worldwide revenues rose by almost a third to about $1 billion.
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    Audio

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Faster, higher, stronger: No one in the sporting goods industry has taken the Olympic motto more to heart than Kevin Plank.

Twenty years ago, Mr. Plank founded Under Armour, which has grown to be the world’s third largest sports-apparel brand. Only U.S.-based Nike and Germany’s Adidas sell more jerseys, athletic shoes and other sports-related items.

In Germany, Under Armour hasn’t played much of a role up to now. Among the suppliers to Intersport, Germany’s leading sporting-goods retailer, Under Armour recently ranked 41st. But that could soon change.

“In the mid- and long-term, Under Armour intends to become number one among the top sporting-goods brands throughout German-speaking countries,” head of marketing Karl-Heinz Maurath told Handelslblatt. The former Adidas manager is the number two in the Baltimore-based company and is pushing forward with worldwide expansion.

“That's a refreshing brand; there hasn't been anything like it for a long time. ”

Philipp Prechtl, Consultant, Dr. Wieselhuber & Partner

“As a core market in Europe, Germany plays a fundamental role for us,” Mr. Maurath said.

The offensive is coming at just the right time. Many store owners in Germany are dissatisfied with global market leader Nike and rival Adidas and are looking for other suppliers. For Under Armour, it’s a great opportunity to seize shelf space.

“Under Armour is pressing the gas pedal to the floor,” said the head of Intersport, Jochen Schnell. “Of all large sporting brands, they are working most aggressively to expand their distribution.”

Last summer, Under Armour chief executive Mr. Plank opened the new German headquarters. Now, there are 40 people working on marketing out of the office in Munich. They’re making some headway: Starting next season, the uniforms of players on the second-league soccer team FC St. Pauli will sport the Under Armour name.

“This is a first exclamation point,” Mr. Maurath said.

More sponsorship contracts are expected to follow. And the Americans will have their own floor space, so-called shop-in-shops, at more and more stores.

Sporting-goods stores from Hamburg to Munich are happy to make space for Under Armour. The stores have been feuding with Nike and Adidas for years.

Take a dispute about Adidas’ Adilettes, for example. From Adidas’ point of view, the flip-flops now enjoy cult status. And so the company has assigned them to its sporting fashion line “Originals.” The consequence: Sporting-goods retailers no longer receive the Adilettes. That’s incredible, says Hans-Hermann Deters, managing director of the purchasing association Sport 2000.

“But the underlying dimension is much more threatening,” he said.

He fears that customers will begin buying on the Internet if they don’t find the products in stores.

“We are having more difficulties with the corporations because they don’t include small- and mid-sized companies in their focus,” Mr. Deters said.

In 2017, Nike intends to raise the minimum order amount from €10,000 to €25,000, he says. This means that more than a fifth of Sport 2000 retailers would no longer receive any products from the brand.

Soon, smaller retailers can expect to play no role with regard to the big brands, warns Andreas Rudolf, general manager of the Sport 2000 association. What further irritates him is that more and more frequently, Nike and Adidas market their products themselves via the Internet or in their own stores.

Sports-retail experts expect Under Armour to rush in to fill this gap.

“That’s a refreshing brand; there hasn’t been anything like it for a long time,” said Philipp Prechtl of the consulting firm Dr. Wieselhuber & Partner in Munich. He is convinced that the retailers will greet Under Armour with open arms.

At the Intersport retail chain, Under Armour rose more than 30 positions in the suppliers list last year. If things continue in this manner, Under Armour will number among the chain’s 10 leading brands this year.

Worldwide, Under Armour is on a roll. In the first quarter, revenues rose by almost a third to about $1 billion.

“For 24 quarters in a row, we have grown by more than 20 percent,” Mr. Plank said this spring when presenting the figures. For the entire year, he promises revenues will rise about 25 percent.

In the United States, Under Armour has replaced Adidas as number two brand in sporting goods stores. In the rest of the world, sales make up only 15 percent of Under Armour’s total revenues. Nevertheless, earnings outside U.S. borders rose by more than 50 percent in the first quarter.

But Mr. Schnell of Intersport says Under Armour isn’t in a position to replace Adidas and Nike yet. Mr. Maurath doesn’t dispute the contention. But he says Under Armour will cultivate its “image as an underdog” in the future.

A little luck can help too. Central defender Antonio Rüdiger of Germany’s national soccer team was injured ahead of the ongoing European Championship, so coach Joachim Löw nominated Jonathann Tah to compete instead. For Under Armour, it was like winning the lottery: In April, the company signed a contract with the 20-year-old player.

 

Joachim Hofer covers the high-tech industry and information-technology sector for Handelsblatt. To reach the author: hofer@handelsblatt.com

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