Under Armour marketing spend goes 'from defence to offence' with new chiefs

Under Armour will be channeling its cost efficiencies and higher gross margin to marketing spend, making a "deliberate?shift from defence to offence". This was according to chairman, CEO and president, Kevin A. Plank, who is transitioning to the role of executive chairman and brand chief in January 2020.

In the third quarter earnings call with analysts, Plank said he will be focusing on three?critical aspects of the brand in his new role to help reignite growth. They are making great products that is authenticated to the power of sport; magnified by incredible storytelling; and delivered by a team that loves the brand.

"Armed with a shortened go-to-market calendar, increasingly better segmented assortments, and a clear pipeline of innovation to come, we are building an arsenal that will continue to demonstrate why Under Armour is a choice alternative in an otherwise commoditised marketplace," he explained.

While Under Armour has realised some success in product-specific marketing efforts over the past couple years, Plank said 2020 will be the first year since the brand's transformation began that it will have the ability to put the "right resources combined with the scale" behind its brand marketing efforts. He added:

Meanwhile, Plank also sees physical and digital connectivity as table stakes for consumer engagement. On the brand and storytelling front, the team has been working to better activate the brand's assets to drive the highest returns. There remains to be "great potential" in better personalising consumer touch points through a sharper, data-driven point of view, he said.

CEO's priorities ahead

Under Armour president and COO Patrik Frisk, who will take over as the CEO in 2020, also outlined his priorities ahead in the earnings call. They include?direct-to-consumer (D-to-C), which came in slightly less than expected in third quarter revenue (-1%), driven primarily by results in North America. While there is higher traffic in the eCommerce business, Frisk said conversion remains low. However, full price stores are showing encouraging signs from some of the reset work that the company has embarked on, including new Brand House concepts that it has recently launched. For the full-year, he expects D-to-C to be up slightly.

Turning to footwear, revenue in the third quarter was down 12%, driven by softer demand, lower sales to the off-price channel, and improving service levels that are enabling us to meet customer demand in a timely manner. Related to service levels, footwear shipments are distributed differently in 2019 with increased amounts in this year's second quarter compared to 2018.

According to Frisk, the company is "playing the long game" in the footwear category. With clear innovation pipeline delivered through a methodical launch cadence, along with an aligned go-to-market process that includes amplified marketing initiatives, he is confident in creating a sustainable runway of growth moving forward. "The work we've done to re-calibrate the business, reduce inefficient volume, and improving segmentation across price points are enabling us to drive greater focus on prioritisation into the categories where we believe we can win," he added.

Frisk's third focus area ahead is the Asia Pacific region, whose revenue was up 4% in the third quarter, including continued growth in the D-to-C channel from both new door openings and eCommerce. Compared to 2018, new store openings are more heavily weighted toward the fourth quarter, "a little bit lumpy, but in line with expectations".

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