Is Under Armour's Kohl's deal bad for business?
As Under Armour needed to fill the void the closing of The Sports Authority left in its business plan, Kohl's seemed to be a perfect retail partner. Like its competitor Nike, Under Armour wanted to expand its women's business. The Kohl's consumer is primarily a suburban mom, which fits the profile.
CEO Kevin Plank was quoted saying, "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."
The problem is that Kohl's is a constant discounter, always running sales and deeply marking down product prices. This is a poor strategy for Under Armour's retail business, particularly when there is approximately a 50% overlap of assortment at Dick's Sporting Goods, which does not follow Kohl's markdown tempo or policies.
When the Dick's buyers see how Kohl's is marking down the product and pulling the consumer there, there is a good chance the buyers won't buy into the same assortments. Either Under Armour will be forced to resegment and offer a different tier of product to Dick's, or it may struggle to keep up the amount of touchpoints it currently has with consumers.
Citi Research analyst Kate McShane noted that Under Armour is trying to copy Nike's market segmentation by offering different levels of product to different retailers, but she said that "will require an expanded assortment and increased emphasis on price point planning than UA has historically offered."
Also key to a depressing forecast for Under Armour is the fact that Kohl's is not a premium retail store. Under Armour has admitted it missed the boat on the athleisure trend and that it needs to play catch up with better lifestyle product design and positioning.
As another analyst noted, selling at "Kohl's does little to enhance the Under Armour brand, especially when there's the need to build a lifestyle business."
Under Armour is continuing to struggle with the expectation that it will be posting its first-ever quarterly loss this quarter. If the Kohl's deal is any indication of how the brand's retail strategy will play out, there is a lot of work to be done to remain competitive.
Copyright © 2022 FashionNetwork.com All rights reserved.