Armoured for Growth: Under Armour Channels "Innovation Obsession" Brand DNA to Expand its Empire

Since its launch 17 years ago, Under Armour has been a growth darling of the athletic performance apparel industry. Recently, the brand has posted eye-popping numbers: its apparel business has grown by more than 20 percent for 14 consecutive quarters, men's has doubled from 2010 and should surpass $1 billion this year, while women's has more than doubled in that time period, expected to exceed $500 million by the end of 2013.

"Over the last two years, we've increased our SKU productivity and still maintained the significant growth in apparel," says COO Kip Fulks. "So we're finding a better mousetrap."

"When a consumer is pulling this brand into a [product] category, it is a winning formula," says Henry Stafford, senior vice president of apparel, outdoor and accessories, speaking at a June shareholder event.

Indeed, the brand aims to increase the number of core platforms generating $100 million in sales annually. Currently, Under Armour's training and baselayer platforms are the only men's apparel categories bringing in that kind of revenue, but high-growth categories such as golf, running, underwear and outerwear are on track to become $100-million categories by 2016.

Foot-loose, fancy-free
To continue growing and excelling, Under Armour will open new design offices in New York City, slated for a fourth-quarter debut, and Portland, Ore., which will focus on footwear, the key product category that Fulks says is the company's "destiny to be a head-to-toe brand."

"There's no schools in the United States that teach how to build shoes," he adds. "This is a true dying art."

Under Armour resurrected and reimagined that dying art in creating its new SpeedForm running shoe, driven in part by a 60 percent jump in consumers buying its footwear between 2011 and 2013, and a combined annual growth rate of 44 percent since 2006.

Thinking outside of the box, footwear team leaders did their research and looked at an iconic product that depended on superior design and fit: the Apollo space suit. It wasn't designed by any of the usual suspects — the Army, Navy, Air Force or DARPA — but by Playtex, an intimates manufacturer that knows that comfort and fit are indispensable.

"We make a lot of stuff at bra factories here at Under Armour," says Dave Dombrow, senior creative director, footwear. "In fact, when you work with the best manufacturers in the world, could we focus on precision manufacturing and reinvent fit?"

Dombrow's team set out to create the first ever seamless heel cup, from heel to toe, assembled ultrasonically in the style of high-performance apparel — even though no footwear factories had the ultrasonic seam technology.

"How do you ‘own fit' if you're making stuff like everybody else, in the same place, doing the same things, day in and day out?" Dombrow says. As a result, the SpeedForm shoe is "inspired by spacesuits, built by a bra factory." 

Key to rethinking its footwear manufacturing process is having partnerships with leading global manufacturers, says Fulks, such as Taiwan's Pou Chen Group. "We really are looking at what we've done in apparel, which is integrating our supply chains with the footwear manufacturing," he adds. "But in some cases, we've decided to convince other folks that aren't footwear manufacturers to get into footwear and really leveraging what we know in apparel into footwear."

Under Armour's footwear business is expected to generate 15 percent of total revenvue by 2016

Relentless research
According to founder and CEO Kevin Plank, Under Armour's headquarters in Baltimore is a major strategic advantage, offering proximity to some of the world's top research organizations, including NASA, DARPA, In-Q-Tel, DuPont and Vista, the Johns Hopkins Applied Physics Lab and Lockheed Martin, all within a 50-mile radius. "These research innovators and our relationships worldwide will enable us to leapfrog existing infrastructure and deliver next-generation product today," he explains.

To create a well-designed sports bra that would resonate with female customers, the brand committed to a two-year project with University of Portsmouth's Joanna Scurr, an expert in biomechanics, that focused on solving technical design challenges. Today, the brand's core ArmourBra has spawned a wide range of low-, mid-, and high-impact bras and lifted Under Armour's bra business from just 6 percent of the women's business to a projected $140 million by 2016.

Leanne Fremar, senior vice president and executive creative director for women's, says the brand wanted to address a new trend in running apparel. Many female runners, who often take their workouts to urban and suburban streets, want to be seen in styles that blend performance and chic, she explains. "You're outside, this is street style. And this is a fashion moment for you now."

E-commerce explosion
Redesigning part of the women's apparel section on the website has helped to drive a "dramatic increase" in average order value, according to Fulks. The "bottoms bar," with simple compelling imagery and a clear presentation of available styles, steers female shoppers to the particular item they're seeking. "There's no more randomness in that," Fulks says. "And by driving people to what they wanted, it actually drove them to a higher-priced item because that was the one that actually fit their occasion."

Under Armour also incorporated a "shop the look" feature, presenting head-to-toe outfits that influence especially female customers to buy not only the pants but also tops and accessories as well. These web updates have yielded a 12 percent jump in average order value across e-commerce, Fulks explains. Web sales account for 9 percent of company revenues, and Under Armour plans to increase that to 25 percent in the near future. E-commerce has grown at a combined annual growth rate of 35 percent between 2010 and 2013.

The next step for Under Armour's online efforts is to transform a good shopping experience into an "iconic brand experience," using video to explain existing products and introduce new ones and adding features that allow kids to upload photos of themselves wearing brand apparel, such as the wildly popular superhero-themed Alter Ego base layer tee, which sold out in less than a month earlier this year and is worn by actor Henry Cavill in the blockbuster movie "Man of Steel."

International aspirations
In the next 12 months, Under Armour will open 10 new offices, including outposts in Panama, Germany, the UK and Australia. "This is no longer a North American apparel company," says Plank, adding that there will be more offices outside of the U.S. than within in the near future.

Targeting a select group of global markets, Under Armour will open a mix of shop-in-shops, franchise stores and own retail stores, says Karl-Heinz Maurath, president of international and a former adidas executive.
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