With the launch of its heavily promoted cross trainer sneaker just two days away, Under Armour is preparing to expand its push into footwear, producing more shoes to be worn off the playing field.
The Baltimore company has begun testing prototypes of a basketball and a running shoe, Kevin A. Plank, Under Armour Inc. chairman, president and chief executive, confirmed in a recent interview.
At least one of the shoes could hit the market as early as next year.
And while Plank wouldn't discuss too many details of its next foray into shoes - preferring not to steal the limelight from Saturday's launch of the cross trainer - it signals the company's intentions to make the Under Armour logo as prominent as the Nike swoosh in the sports apparel market.
The success or failure of the cross trainer, based around the slogan "Stop Training in Running Shoes," will determine just how fast and aggressively the company enters other shoe categories. It's also a test of the company's strategy to broaden the brand. Under Armour is spending millions to promote the new shoe, taking a hit on earnings in the first half of the year."The way that we are going to define success in training footwear is our position at year-end to enter additional categories," Plank told analysts during a recent conference call. "I think the opportunity is there for us to enter additional categories, but we're going to know a lot more after Saturday."
The cross trainer follows the company's initial move into footwear with cleats for football, baseball and softball that are worn only on the field and have a limited audience. Analysts say more is at stake with the cross trainer, which could determine just how powerful the Under Armour brand is in attracting consumers.
"A high-profile success could cause investors to consider the possibility that this could be the next Nike, while a failure might mean that the brand's appeal does not extend beyond athletic apparel," Credit Suisse analyst Omar Saad wrote in a research report.
The company is launching the shoe during difficult economic conditions. The housing implosion and credit crunch along with rising prices for gasoline, energy and food are prompting consumers to be more cautious. Most retailers are feeling the pinch.
Under Armour said this week that it was going to lower prices at its outlet stores and open more stores to get rid of excess apparel it wasn't able to sell to its retail partners, such as Dick's Sporting Goods.
A cross trainer introduced by Nike in April to counter Under Armour's planned shoe didn't bring in the numbers that many had anticipated, selling in the first week at about a fourth of the rate of a typical Michael Jordan retro shoe, according to Susquehanna Financial Group.
"As far as we can determine, the Nike product has had fair success," said John Shanley, a shoe analyst for Susquehanna. "I don't think it was quite the door-buster that Nike had anticipated."
Plank said he isn't focused on the competition.
'To get better'
"Maybe they didn't do a good enough job of getting their message out," Plank said after a presentation on Under Armour's new shoe to salespeople at Dick's Sporting Goods in Columbia.
He's optimistic the cross trainer will sell well. The company is pitching its shoe as a performance trainer for a niche group of hard-core athletes who train "not to maintain. But to get better every day." The company has strategically planned to put just 1 million pairs, with three models priced at $89 to $100, in stores.
"Athletes will still need to train," Plank said. "If we're really doing our job, our brand will grow."
Some analysts agree.
"We believe the launch will be successful despite difficult macro conditions given its tight allocation, strong demand for the brand and the large white space in the training segment," Credit Suisse's Saad wrote in his report.
If all goes well, Under Armour plans to release another shoe prototype next year, Wayne Marino, Under Armour chief operating officer told analysts this week.
The company tested prototypes of a running shoe with running groups in Baltimore several weeks ago. Jim Adams, owner of the Falls Road Running Store, said the shoes were very colorful and looked cutting edge. He said both "middle-of the-road" and advanced runners tried the shoe. One of the main designers of the shoe held focus groups at Adams' running store.
Reactions varied from liking the shoe to thinking it might be too fashionable to run in, Adams said.
Under Armour has also hired people from the maker of popular basketball shoe And 1, named after the basketball call when a player gets fouled while making a basket and gets one foul shot. They've also hired people from Nike, Reebok and Adidas. Under Armour has grown its footwear team from 17 people more than two years ago when it launched the football cleat to 100 today, Plank said.
The running and basketball markets could be difficult markets to break into for different reasons, analysts said.