UNDER ARMOUR

LIVE CASE RECOMMENDATION

906 Consulting
Mary Cowles, Taylor Gonder, Josh Serene, and Justin Williamson
INTRODUCTION

(Spring Live Case Study Document, 2022)

● Under Armour is a household name in the sportswear industry

● The wholesale industry contributes a majority of the company’s
revenue
● Industry is shifting towards direct-to-consumer
● Should Under Armour follow suit?
CHALLENGE
● Under Armour’s massive wholesale exits in 2020 has introduced many
questions that must be addressed.
● Need to have partnerships that are brand-right, profitable, and capable of
elevating UA brand.
● COVID-19 Pandemic has shifted revenue base of UA, leading to a tighter
focus on DTC rather than wholesale.
● UA desires a recommendation on where to focus - on DTC or Wholesale?
Are there any further recommendations?
OUR RECOMMENDATION
Decrease presence in Kohl’s over a
1 five-year period

Close revenue gap by opening more mall and

2 factory house locations

Capitalize on Nike's departure from Foot Locker by

3 negotiating a wholesale partnership
 OUR RECOMMENDATION
DECREASE PRESENCE IN KOHL’S OVER A FIVE YEAR PERIOD

● Disparity between “focused

performer” and Kohl’s demographic of
women aged 34-54 (Swartz, 2020).
● Decreases value of brand image
● Products placed alongside competitors
with little differentiation
● Kohl’s plan to appeal to the “more
active and casual lifestyle” does not fit
Under Armour’s target audience (
Meyersohn, 2022)
(Kohl's, 2018)
 OUR RECOMMENDATION
DECREASE PRESENCE IN KOHL’S OVER A FIVE YEAR PERIOD

● Department stores have faced pressure to

decrease prices to compete with discount retailers
(Meyersohn, 2022)
● Full-priced items are being discounted, decreasing
the value of the brand
● Under Armour should design inventory for discount
at Factory House Stores

(Sozzi, 2020)
 OUR RECOMMENDATION
CLOSE REVENUE GAP BY OPENING MORE MALL AND FACTORY HOUSE LOCATIONS

● Physical retail is experiencing a revival (Dennis,

2022)
● Department stores are “hemorrhaging market
share” (Dennis, 2022)
● Anchor store could increase brand awareness
● Mall locations will attract a variety of
demographics while preserving a designated space
for the “focused performer”
(Podsada, 2014)
 OUR RECOMMENDATION
CAPITALIZE ON NIKE’S WITHDRAWAL FROM FOOT LOCKER

● Nike has withdrawn from Foot Locker in

their shift to DTC (Salpini, 2022)
● Opportunity to increase Under Armour’s
footwear sales from 2% (Live Case)
● Under Armour can take this space in the
market to align better with their target
market
● Focused performers are more likely to
shop in Foot Locker than other partner
locations
(Reuters, 2021)
 Focusing on the “Focused Performer”
Foot Locker
● Holds a 27.7% market share of Athletic Shoe Stores (Thomas. 2021)
● Superior Customer Service
● Specialized Stores Catering to Niche Markets

UA Brand and Factory Stores

● Currently there are 176 Factory House and 18 brand house stores in the U.S. / North America
● Opening stores in Shopping Centers will increase Direct -to- Consumer revenue
● Stores can cater specifically to the Focused Performer
THE THREAT OF IMITATION
● Hard to find a mall, outlet, or FootLocker location where there won’t be any
competitors because the industry is so large
● UA focuses on performance rather than making the most fashionable sportswear
apparel (Obedkova, 2022)
○ This sets them apart from their current competitors and potential new ones
who may enter the market in those malls our outlet locations.
● Under Armour uses innovation and the ability to create new, sustainable
materials to offer customers to stand out
○ MicroThread Platform is unique to the brand and can’t be imitated easily
(Under Armour, 2022)
 BUDGET - Retail location Costs
Annualized at Present Value
Budget to open a retail location - $325,000 Budget to maintain stores annually - $315,000

●Rent - $30,000
Market research - $1,000 upfront cost
●Average salaries are $26,000 for employees and
●Signage - $2,000 up front cost
$45,000 for management.
●Rent - $30,000 ○Assuming 5 employees and two managers, annual
●Average salaries are $26,000 for employees and salary and related fringe benefits equals $273,000
$45,000 for management. ●IT Maintenance - $1,000 annually
○Assuming 5 employees and two managers, annual salary ●Licensing and Insurance - $1,000
and related fringe benefits equals $273,000
●Signage - $500
●Licensing and Insurance - $1,500
●Office supplies - $2,000 annually
●Equipment and Furniture= $8,000 ●Utilities - $7,500 annually
●Office supplies = $2,000
●Utilities - $7,500 (Hudson, 2021) (Card Connect.com, 2022)
(Commercial Cafe, 2022)
(Hudson, 2021) (Card Connect.com, 2022)
(Commercial Cafe, 2022)
 BUDGET - Present Value of 5 Year Plan

Net Revenues: $222,733,350 Expenses: Expense Savings:

Decreases from Kohl’s for total of 2%
decrease in net revenue - $(89,493,340)
This will be offset by:
● Foot Locker Partnership to
increase sporting goods sales
revenue by 3% - $134,239,290
● New retail and factory store
locations to increase DTC net
sales revenue by 4% -
$177,987,400
● Start up expenses for ● Reduced supply chain
Foot Locker costs to Kohl’s locations
Partnership ● Savings for retail
○ Supply Chain costs locations on external
● Start up expenses for services and licenses
retail locations - from using existing
$325,000 per location branding, marketing, and
● Ongoing expenses for administrative services.
retail locations -
$315,000 per location

(Obedkova, 2022) (Spring Live Case Study Document, 2022)

 MILESTONES

2022 2023 2025 2027

Begin Shift from Kohl’s,

Launch of New Locations, Mall Locations Operational, Shift from Kohl’s Peaks, New
Research Store Openings,
Partnership with Foot Locker Shift from Kohl’s Accelerates Locations Fully Running
Reach out to Foot Locker
Mall locations are operational by With our Kohl’s partnership greatly
Introduce shift away from Kohl’s. While shifting away from Kohl’s, new
2025 while other locations are reduced, new mall/factory stores are
Conduct research on market locations begin to open to create
undergoing development. As stores fully running and producing revenue
locations for new mall/factory store new revenue stream. Partnership
open and produce revenue, to fill the loss from Kohl’s.
locations. Reach out to Foot Locker with Foot Locker is fully underway.
accelerate the decoupling from
and get partnership talks underway.
Kohl’s.
 Thank you.
Any questions?
References

Card Connect.com. (2022). Startup Cost Calculator. Retrieved April 14, 2022 from https://cardconnect.com/startup-
cost-calculator

Commercial Cafe. (2022). Towson Town Center. Retrieved April 14, 2022 from
https://www.commercialcafe.com/commercial-property/us/md/towson/towson-town-center/

Dennis, S. (2022, January 21). 10 No-Holds-Barred Predictions for Retail in 2022. Forbes. Retrieved on April 8, 2022
from https://www.forbes.com/sites/stevendennis/2022/01/21/10-no-holds-barred-predictions-for-retail-in-2022/?
sh=67fb4dd87d2b

Dess, G., McNamara, G., Eisner, A., & Lee, S. (2020). Strategic Management: Creating Competitive Advantages.
(10th ed.). McGraw Hill.

Hudson, M. (2021, March 12). How Much Does It Cost to Start a Retail Business. The Balance Small Business.
Retrieved April 14, 2022, from https://www.thebalancesmb.com/how-much-does-it-cost-to-start-a-retail-business-
2890132
References

Meyerson, N, (2022, March 8). Kohl’s Says It’s No Longer a Department Store. CNN Business. Retrieved on April 10,
2022 from https://amp.cnn.com/cnn/2022/03/08/business/kohls-stock-investor-day/index.html

Obedkova, A. [Towson University Panopto]. (2022, March 1). Spring 2022 - Q&A Session [Video]. Blackboard
Panopto. https://blackboard.towson.edu/ultra/courses/_246708_1/cl/outline

Salpini, C. (2022, February 25). Nike Moves Away from Foot Locker. Retail Dive. Retrieved on April 10, 2022 from
https://www.retaildive.com/news/nike-moves-away-from-foot-locker-in-shift-to-dtc/619441/

Swartz, D. (2020, September 29). Kohl’s is on Sale. Morningstar. Retrieved on April 8, 2022 from
https://www.morningstar.com/articles/1002770/kohls-is-on-sale

Under armour investor - UA newsroom. (n.d.). Retrieved April 24, 2022, from http://investor.underarmour.com/static-
files/ec55b9c6-e773-415c-b487-b7de38531361