First Kohl’s, Now DSW: What Under Armour’s New Retail Partnerships Say About the Brand’s Future

Under Armour Curry 3
The first 10 colorways of the Under Armour Curry 3 at the brand's spring '17 press preview.
Peter Verry.

Amid concerns surrounding its slowing growth, Under Armour has launched a series of new retail partnerships: Kohl’s Corp. kicked off early this year and DSW Inc. announced this week its own Under Armour launch in time for the back-to-school season.

When Under Armour — which has also experienced significant stock pullback over the past year — announced its Kohl’s deal in July, investors’ top concerns were whether the move would take the label down-market and how it fit in to the company’s overall brand strategy.

Now, the partnership with off-price retailer DSW has caused familiar worries to resurface — particularly for Under Armour’s footwear business, which is in its infancy.

“Under Armour’s footwear business is smaller and still developing, so they need to be careful there,” Susquehanna Financial Group LLLP analyst Sam Poser said.

What’s more, DSW vice chairman and chief merchandising officer Debbie Ferrée said the retailer plans to collaborate with Under Armour’s design team for several athletic styles unique to DSW, raising additional concerns.

“I would argue that athletic is not a core competency of DSW,” Poser noted. “The [results will hinge on] how Under Armour manifests itself in DSW stores and how they segment the brand [across retailers].

After performing store checks at Kohl’s earlier this month, Poser said he found that the brand was already experiencing challenges with its segmentation of men’s and women’s apparel. “Fifty percent, maybe a bit more, of the styles [selling in Kohl’s] are also available at Dick’s [Sporting Goods],” he noted. (Meanwhile, footwear and kids’ products seemed to experience less overlap, according to Poser.)

B. Riley & Co. analyst Jeff Van Sinderen made similar observations regarding a need to execute crafty product segmentation, noting that the brand’s need to drive volume could come at a cost.

“I think for Under Armour, it’s tough because they need to find new points of distribution,” explained Van Sinderen. “It is a bit of a double-edged sword, they need to grow, but in doing so, they may risk compromising brand image.”

Under Armour was one of the brands hit hardest by The Sports Authority’s bankruptcy last year. Originally, it had planned to bring in $163 million in revenues from Sports Authority in 2016 but ended up seeing around $43 million, and Poser said he also believed that the company is making strategic moves to boost incremental volume and make up for lost Sports Authority business.

In that vein, planned partnerships with Shoe Carnival, Famous Footwear and others are also coming down the pipeline for the brand, said Poser.

Concerns aside, analysts seem to agree that it is likely a wait-and-see game for Under Armour’s retail partnerships — particularly when it comes to its footwear business, which has lost momentum in tandem with a slowing basketball market and the waning popularity of superstar endorser Stephen Curry.

“Under Armour is primarily an apparel brand,” Van Sinderen said. “Footwear is a secondary category for them, and it will take them some time to get the formula right in all aspects of that business.