Under Armour unveils new innovation hub on Nike turf
Under Amour on Thursday unveiled its new "UA PDX" center, an innovation hub that brings footwear design and development under one roof, in Portland, Oregon — aka Nike turf.
About 100 professionals in design, development and innovation will create the company's next generation basketball, running, training, golf, sportstyle and outdoor footwear, according to a company press release. The 70,000 square foot building is in Southwest Portland adjacent to the recently refurbished Duniway Park, at the site of a former YMCA facility about eight miles from Nike’s Beaverton, Oregone headquarters.
Under Armour also contributed to refurbishing and updating the sports fields, running tracks and trails at Lents and Duniway Parks in downtown Portland, the company said.
Under Armour may be setting up its new hub close to Nike HQ, but the athletic brand has fallen farther from its number one rival as Adidas wrenched back the number two spot last year.
Adidas’ sales growth of nearly 20% prompted Cowen & Co. analyst John Kernan to note last week that the German athletic retailer is "outgrowing Nike meaningfully in all major geographical regions and placing greater pressure on [Under Armour]." The company’s 66% e-commerce growth "continues to highlight the massive opportunity in [direct-to-consumer sales]," he added.
Nike has already taken that note, evident in its decision to sell directly to customers via Amazon in addition to its own stores and website.
Under Armour executives told analysts in July that the company plans to shed about 2% of its workforce as part of a restructuring plan that followed a second quarter loss to shareholders. The shoe and athletic apparel seller reported revenue of $1.1 billion for the second quarter, an increase of 9% compared to the prior-year period, according to a company release. Of that, wholesale revenue was $655 million, a 3% jump from Q2 last year, and direct-to-consumer revenue rose 20% to $386 million. For the year, Under Armour lowered its expectations for revenue growth to between 9% and 11%, down from previous guidance of 11% to 12%.
Under Armour Chairman and CEO Kevin Plank said in a statement then that the company's restructuring plan is meant to "meaningfully increase" the athletic brand’s go-to-market speed and "amplify our digital capabilities." All said, it will cost the company up to $130 million in severance, lease termination and other costs. Anthony Riva, analyst at GlobalData Retail, described Under Armour’s Q2 performance as a "downbeat set of numbers from the once mighty Under Armour," in comments emailed to Retail Dive.
"There can be little doubt that many of the favorable dynamics that previously powered the brand's success have turned sour," Riva said. "In so doing, they have left the company and its operational structure exposed, resulting in an uncharacteristic net loss of $12.3 million."
Riva pointed out that Under Armour’s North American sales — its "main engine of growth" — have stalled as the sports apparel market has become heavily discounted. But Riva doesn’t let the company off the hook by attributing the slowdown entirely to market dynamics. He also argues that Under Armour’s brand "does not have the clarity or a sense of purpose in the way that Lululemon or even Nike does."
The innovation center announced Thursday may be designed to address that. "Footwear is a key driver of our long-term growth and success," Peter Ruppe, senior vice president for Footwear at Under Armour, said in a statement. "We've established a strong foundation, and now UA PDX represents a considerable leap forward towards creating leading performance footwear designed to make athletes better."
While the new team's mandate appears to be centered on UA's athletic styles, the nod to "sportstyle" could indicate a recognition that streetwear is an increasingly important segment for these brands' portfolios. Indeed, despite its success in the running and training categories, Adidas has staked much of its growth on street styles and that is partly why Jane Hali and Associates analysts remain keen on the brand. "They continuously release new colorways for some of their key products like the NMD," according to a Jane Hali note emailed to Retail Dive. "Adidas Originals is always successful as the product resonates with a fashion upscale customer. The product continues to be design led with minimalistic silhouettes."
- press release via PR Newswire Under Armour Introduces Global Innovation Hub For Footwear Design In Portland, OR
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