Tough questions for Under Armour

Sports apparel maker promises long-haul gains

May 07, 2008|By Andrea K. Walker | Andrea K. Walker,Sun reporter

Julia B. Anderson was impressed with the high-tech presentation Under Armour put on yesterday during its annual meeting at the ESPN Zone sports bar and restaurant - complete with big-screen televisions and snippets from its various marketing campaigns.

But what Anderson isn't so impressed with is the company's stock price. And yesterday, Anderson told Under Armour executives just that. She bought the stock three years ago when it priced at more than $50. Yesterday it closed at $35.

"Is there anything you can say to make me feel better?" the research scientist administrator at the National Institutes of Health asked the panel of Under Armour executives, which included Kevin A. Plank, chairman and chief executive officer.

Just as Under Armour Inc. has learned to deal with the scrutiny of Wall Street since becoming a public company in 2005, it's also finding its shareholders are asking tougher questions, something Plank said he has noticed.

"We're not a new company anymore and people are starting to know us," he said.

Wayne A. Marino, Under Armour chief operating officer, fielded Anderson's question, saying that the company has addressed the two primary problems that have weighed on the stock price. The company has put in a plan to better control what some analysts consider high inventory levels. It has also learned to better communicate with Wall Street about fluctuations in its business that may affect revenue, such as when it shifted more marketing money to the first half of the year to promote a new cross trainer shoe it launched last weekend.

Marino also said that Under Armour is a company with healthy top line and bottom line growth that should boost the stock price in the long run.

"The markets are efficient and will recognize that over time," Marino said.

It wasn't exactly what Anderson, who bought Under Armour shares after noticing her nephew and his friends loved its sportswear, wanted to hear. But she said she'll hold on.

"I'm going to continue to invest in the company because I believe in the product," she said in an interview after the meeting.

Shareholders, who sat at the bar and at tables with mini-televisions, also asked about the company's practices at its overseas manufacturing plants and whether the company has been able to maintain pricing in a weak retail environment.

"Even with the current environment, we're seeing our product at full price and we're not discounting," Marino told shareholders.

Plank said the company in many cases relies on manufacturers that have been used and scrutinized by other companies in the sports industry for years. It also has its own quality team that visits plants once a week.

In between the serious questions, most shareholders were most curious about what product launches were next for Under Armour.

Biking and golfing gear, possibly.

"Everything we get into has to make sense," said Marino, an avid biker. "We like to say it's like a book with chapters. I think you'll see for us to be there. But it makes sense when it's the right time."

Walking doesn't look so promising.

"Maybe a better indicator is not walking, but maybe we'll run a little bit. ... Hint, hint. Nudge, nudge," Plank said with a laugh. He has said the company has prototypes for a running and basketball shoe.

Plank said Saturday's launch of a cross trainer, which it hopes will help it expand to other sports shoes, went better than expected. He said weekend sales reached what they'd expected to make for the entire week, and he sees footwear eventually surpassing apparel sales.

andrea.walker@baltsun.com

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