External Analysis

1. Conduct a strategic comparison of UA and its top competitors with regard to distribution systems; how have UA's competitors evolved their wholesale strategies?

COMPANY OPERATIONS

Marketing and Promotion

We currently focus on marketing our products to consumers primarily for use in athletics, fitness, and training activities, with an emphasis on connecting with our target consumer - the focused performer. We seek to drive consumer demand by building brand awareness that our products deliver advantages to help athletes perform better.

Sports Marketing

Our marketing and promotion strategy begins with providing and selling our products to high-performing athletes and teams at the high school, collegiate and professional levels. We execute this strategy through outfitting agreements, professional, club, and collegiate sponsorship, individual athlete and influencer agreements and by providing and selling our products directly to teams and to individual athletes. We also seek to sponsor and host consumer events to drive awareness and brand authenticity from a grassroots level by hosting combines, camps and clinics for young athletes in many sports. As a result, our products are seen on the field and on the court, and by various consumer audiences through the internet, television, magazines and live at sporting events. This exposure to consumers helps us establish on-field authenticity as consumers can see our products being worn by high-performing athletes. We are the official outfitter of athletic teams in several high-profile collegiate conferences as well as multiple professional sport organizations supporting the athletes on and off the field. We sponsor and sell our products to international sports teams, which helps to drive brand awareness in various countries and regions around the world.

Media

We feature our products in a variety of national digital, broadcast, and print media outlets. We also utilize social and mobile media to engage consumers and promote connectivity with our brand and our products while engaging with our consumer throughout their performance journey. For example, in the first quarter of Fiscal 2020 we launched a new brand campaign, "The Only Way Is Through", which was introduced during a Performance Summit with over 180 social media influencers and was re-activated through brand authentic moments across the calendar year. Additionally, during the initial wave of the COVID-19 pandemic, we transitioned our campaign from "The Only Way is Through" to "Through This Together" that provided consumers with at home workout solutions across various digital platforms.

Retail Presentation

The primary goal of our retail marketing strategy is to increase brand floor space dedicated to our products within our major retail accounts. The design and funding of Under Armour point of sale displays and concept shops within our major retail accounts has been a key initiative for securing prime floor space, educating the consumer and creating an exciting environment for the consumer to experience our brand. Under Armour point of sale displays and concept shops enhance our brand's presentation within our major retail accounts with a shop-in-shop approach, using dedicated floor space exclusively for our products, including flooring, lighting, walls, displays and images.

Sales and Distribution

The majority of our sales are generated through wholesale channels, which include national and regional sporting goods chains, independent and specialty retailers, department store chains, mono-branded Under Armour retail stores in certain international markets, institutional athletic departments and leagues and teams. In various countries where we do not have direct sales operations, we sell our products to independent distributors or we engage licensees to sell our products. We also sell our products directly to consumers through our own network of brand and factory house stores and through e-commerce websites globally. Factory house store products are specifically designed for sale in our factory house stores and serve an important role in our overall inventory management by allowing us to sell a portion of excess, discontinued and out-of-season products, while maintaining the pricing integrity of our brand in our other distribution channels. Through our brand house stores, consumers experience the premium full expression of our brand while having broader access to our performance products. In Fiscal 2020, sales through our wholesale, direct-to-consumer, licensing and Connected Fitness channels represented 53%, 41%, 2% and 3% of net revenues, respectively. We believe the trend toward performance products is global and plan to continue to introduce our products and simple merchandising story to athletes throughout the world. We plan to continue to grow our business over the long term in part through continued expansion in new and established international markets. We are introducing our performance products and services outside of North America in a manner consistent with our past brand-building strategy, thereby providing us with product exposure to broad audiences of potential consumers. Our primary business operates in four geographic segments: (1) North America, comprising the United States and Canada, (2) Europe, the Middle East and Africa ("EMEA"), (3) Asia-Pacific, and (4) Latin America. Each of these geographic segments operate predominantly in one industry: the development, marketing and distribution of branded performance apparel, footwear and accessories. We also operate our Connected Fitness business as a separate segment.

Despite these multiple business lines, this case concentrates only on the North America region.

North America

We sell our apparel, footwear, and accessories in North America through our wholesale and direct-to consumer channels. Net revenues generated from the sales of our products in the United States were $2.7 billion and $3.4 billion for Fiscal 2020 and 2019, respectively. Our direct-to-consumer sales are generated through our brand and factory house stores and e-commerce website. As of December 31, 2020, we had 176 factory house stores in North America primarily located in outlet centers throughout the United States and Canada. As of December 31, 2020, we had 18 brand house stores in North America throughout the United States and Canada. Consumers can purchase our products directly from our e-commerce website, www.underarmour.com. In addition, we earn licensing revenue in North America based on our licensees' sale of collegiate apparel and accessories, as well as sales of other licensed products. We distribute the majority of our products sold to our North American wholesale customers and our own retail stores and e-commerce businesses from distribution facilities we lease and operate in California, Maryland and Tennessee. In addition, we distribute our products in North America through third-party logistics providers with primary locations in Canada, New Jersey, and Florida. In some instances, we arrange to have products shipped from the factories that manufacture our products directly to customer-designated facilities.

NORTH AMERICA WHOLESALE

Sports Authority Bankruptcy

Sports Authority, once the nation's largest independent sporting goods retailer, filed for Chapter 11 bankruptcy in 2016. In response to the bankruptcy, Under Armour cut its guidance, incurred a $23 million impairment charge, and forecasted $120 million in sales losses due to the store closures.

Kohl's Partnership

In March 2017, Under Armour announced a partnership with Kohl's, which saw Under Armour products being sold in over 1,000 Kohl's stores nationwide. Former CEO Kevin Plank on the partnership: "We believe that there's a massive opportunity with the consumer that's walking into those [Kohl's] stores and looking for the Under Armour brand and, frankly, they haven't been able to find it." Analysts were skeptical of the partnership, noting that "Kohl's does little to enhance the Under Armour brand" due to the significant discounting and markdown strategies employed by Kohl's.

Apparel

Our apparel is offered in a variety of styles and fits intended to enhance comfort and mobility, regulate body temperature and improve performance regardless of weather conditions. Our apparel is engineered to replace traditional non-performance fabrics in the world of athletics and fitness with performance alternatives designed and merchandised with a variety of innovative techniques and product styles. Our highly technical products extend primarily across the sporting goods, outdoor and active use markets. We market our apparel for consumers to provide a benefit you never knew you needed, but can't imagine living without, including HEATGEAR to wear 2 when it is hot, COLDGEAR to wear when it is cold, or our RUSH or RECOVER designed to increase blood flow. Our apparel comes in three primary fit types: compression (tight fit), fitted (athletic fit) and loose (relaxed). HEATGEAR is designed to be worn in warm to hot temperatures under equipment or as a single layer. While a sweat-soaked traditional non-performance T-shirt can weigh two to three pounds, HEATGEAR is engineered with a microfiber blend designed to wick moisture from the body which helps the body stay cool, dry and light. We offer HEATGEAR in a variety of tops and bottoms in a broad array of colors and styles for wear in the gym or outside in warm weather. COLDGEAR is designed to wick moisture from the body while circulating body heat from hot spots to help maintain core body temperature. Our COLDGEAR apparel provides both dryness and warmth in a single light layer that can be worn beneath a jersey, uniform, protective gear or ski-vest, and our COLDGEAR outerwear products protect the athlete, as well as the coach and the fan from the outside in. Our COLDGEAR products generally sell at higher prices than our other product styles. Footwear

Footwear

Footwear primarily includes products for running, basketball, cleated sports, slides, training, and outdoor. Our footwear is light, breathable, and built with performance attributes for athletes. Our footwear is designed with under-foot cushioning technologies including UA HOVR, UA Micro G, UA Flow, and Charged Cushioning, engineered to a specific sport with advanced outsole construction.

Accessories

Accessories primarily includes the sale of athletic performance gloves, bags, headwear and sports masks. Our accessories include HEATGEAR and COLDGEAR technologies and are designed with advanced fabrications to provide the same level of performance as our other products.

Connected Fitness (Digital)

We offer digital fitness subscriptions, along with digital advertising through our MapMyFitness platform.

License

We have agreements with licensees to develop certain Under Armour apparel, accessories, and equipment. To maintain consistent quality and performance, our product, marketing, sales, and quality assurance teams are involved in substantially all steps of the design and go to market process in order to maintain brand and compliance standards and consistency. During 2020, our licensees offered collegiate apparel and accessories, baby and youth apparel, team uniforms, socks, water bottles, eyewear and other specific hard goods equipment that feature performance advantages and functionality similar to our other product offerings.

See below for net revenues split by product area:

Wholesale Exits

On October 30, 2020, Under Armour announced it would exit between 2,000 and 3,000 wholesale doors in North America in an effort to focus more on direct-to-consumer and abandoning undifferentiated wholesale partners. CEO Patrik Frisk said that UA is "focused on prudent marketplace management and working proactively to ensure that we show up in distribution that is brand-right, profitable, and capable of elevating the Under Armor brand with Focused Performers."