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Under Armour in unfamiliar territory after posting 1Q loss

Under Armour CEO Kevin Plank

While some analysts question whether Under Armour can duplicate its stratospheric growth rate, company CEO Kevin Plank says the Baltimore sports apparel giant is positioned to bounce back from a small loss in the first quarter of 2017. (File photo)

In 2010, Under Armour Chief Executive Officer Kevin Plank issued a warning to his athletic wear rivals. Full of the bluster and bravado that defined Plank and his scrappy underdog company from Baltimore, he named names and called them all out. “Our goal for getting into basketball is to be No. 1,” said Plank.

What about Nike? “Those guys are old,” he said.

Seven years later, however, Plank is content to tout Under Armour Inc. as the third-largest sports brand in the world, pointing out that Nike and Adidas are a “long ways away.” The 44-year-old, whose biggest claim to fame of late was triggering consumer blowback for supporting Donald Trump, admitted to various missteps and conceded that the company he built remains comparatively small. This act of contrition came as the company posted its first-ever loss as its initial spurt of growth accelerates in the other direction.

“We’re not perfect. We don’t think we’re there yet,” Plank said during a call with analysts on Thursday. “We are using 2017 as a year to get better.”

Slow growth

Growth has slowed for Under Armour in the face of aggressive competition from those two established brands alongside weak demand for its shoes. Under Armour’s footwear business collapsed in the first quarter — growing just 2 percent after surging 64 percent a year earlier — as the third edition of NBA star Steph Curry’s signature basketball shoes disappointed. Revenue declined 1 percent in North America, offsetting gains overseas.

Even the little bit of good news for the company—shares rose as much as 12 percent on Thursday—comes with a caveat: Wall Street was surprised the company didn’t lose even more money.

“It’s very clear that they aren’t going to return to the days of 20-plus growth,” said Matt Powell, an analyst for NPD Group. “Their business is tough. They do need to take a step back and do the hard work to correct the missteps they’ve had.”

In Baltimore and elsewhere in Maryland, Plank’s presence seems at times ubiquitous, as his various affiliates have launched, or are in the process of launching, a whiskey distillery, a horse racing stable, a luxury hotel in Fell’s Point, and an innovation laboratory at City Garage.

But investors nationally have other interests. They wonder if Under Armour can return to its high-growth days, said Simeon Siegel, an analyst at Instinet LLC.

“If not, it’s a different type of company,” he said. “And it’s not to say it’s not still a loved brand, but it’s a loved brand at a different level on the podium.”

‘Play offense’

During the call Thursday, Plank blamed some of the company’s sales problems on its amount of retailers, noting Under Armour only has about 11,000 retail “points of destination,” about half as many as Nike an Adidas.

“We’re going to play offense this year, but we’re prepared for whatever the market brings to us and we feel good about that,” he said.

Despite a recent deal with Kohl’s, Plank said Under Armour is not anticipating launching a product distribution deal with any other big box retailers “for a long time.” He also said the company will focus on improving products in categories the athletic apparel firm have recently expanded into.

“I don’t believe we need to add new distributors or need new categories,” Plank said.

Under Armour has struggled to build fashion credibility to push its lifestyle kicks. Plank, however, has a plan. He said he hopes to build coolness through its UAS label, a high-fashion line from former Ralph Lauren Corp. and Adidas fashion designer Tim Coppens, that’s hosted runway shows each of the past two seasons. Plank sees it providing a “halo” effect, bolstering his other categories. A new lifestyle line called Unstoppable is due out this year.

Meanwhile, Under Armour’s cool factor keeps getting hit. In February, Plank’s positive comments about the new U.S. president drew the ire of Curry, as well as of spokes-stars Dwayne Johnson and Misty Copeland. The company took out a full-page ad in its hometown newspaper to try to defuse the situation.

One thing Plank wasn’t willing to concede, however, was the strength of the Under Armour name.

“I truthfully wouldn’t change positions with anyone else in the world — with any other brand,” he said.

 Bloomberg and Daily Record business writer Adam Bednar contributed to this story.