The No. 3 athletic-apparel manufacturer, Under Armour (NYSE: UAA) (NYSE: UA), held its annual shareholder meeting at the end of May. The mood was more serious than the previous year's meeting since the streak of 26 consecutive quarters of 20%-plus revenue growth had come to an end, and the stock is now down over 40%.
Key takeaways for investors from the meeting were that the company is focused on driving growth from its current categories and continuing to invest in e-commerce, and it has plans to make its e-commerce website a destination customers will want to visit.
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Focused on executing with current assets
While a number of topics were covered in the prepared remarks and shareholder questions, one key theme came through loud and clear: Under Armour is sticking with its current product categories and existing retail partners to drive growth. Plank used the phrase "acquisition to activation" as he did in the most recent earnings call to explain how the company can grow without having expanded into new categories. Kevin explained what he meant by that phase by using an aerial photograph of Hong Kong in 1965 and overlaying a recent picture. In the Hong Kong 1965 picture, there was no more land to build on, but Hong Kong has grown significantly since then by going "vertical." Small buildings were replaced with larger buildings, and multistory buildings were replaced by skyscrapers.
Plank politely said "no" or "not now" when responding to shareholder questions about getting into polo because of his love of horses or to support the local Baltimore community by creating a line of clothing for the sailing community. As he said in the beginning of the presentation, he wants to make Under Armour simpler and be "great at everything we do." Since the company is a bit on the ropes, shareholders should like that the management team is focused on executing with its current partners and products rather than chasing growth at any cost. Another theme covered in the meeting was the company's e-commerce efforts.
Doubling down on e-commerce
In the past, Plank has said, "I don't know if anyone can imagine that they can put enough money toward their digital businesses today." The shareholders meeting was no different. He said the company is "doubling down on e-commerce." In the prepared presentation, Plank emphasized that the company is continuing to work on its connected fitness apps and the data these apps provide to be a center of transformation for the company. Under Armour is collecting data from several sources: the 200 million athletes on the UA apps, UA retail store points of sale data globally, and transactional data from wholesale partners to create a single view of the customer (SVOC). Management sees this data as a competitive advantage as it works toward what Plank called "digitizing business."
Shareholders were concerned about the disruption of the retail space and Under Armour's progress on its digital initiatives, and the audience asked a number of questions along those lines (including me). Plank was as engaged as ever as he answered every one personally, further driving home the points made in the prepared presentation. While the answers to these questions were more general and consistent with previous comments on the state of retail, Plank answered my question with a specific example that shows how customers benefit from UA's investment in e-commerce.
Making UA e-commerce more customer-centric
Part of the reason for Amazon's success has been its customer-centric approach, with investments in its e-commerce platform. My question related to that kind of investment and what plans did Under Armour have to enhance its e-commerce platform to ensure customers love the experience and come back again and again. Plank said it was something they were "thinking about all the time" and that the data it is collecting will allow customers to personalize and customize UA products. Plank said the data collected could help "anticipate" athlete's needs, and he summed up his remarks with the statement that the company was "early in the journey."
Plank did mention a specific e-commerce enhancement, a footwear customization tool, that was "coming soon." This feature is now available on its website and is a footwear product called the UA Icon. It comes in three styles: basketball shoe, football cleat, and soccer cleat. The customizing process starts from a blank white shoe, and you can then customize 12 different parts of the shoe, including the laces, UA logo, or even use your own photo to decorate. Personalization efforts like this will be important for the company to continue to attract and keep customers in this competitive space.
Plank opened and closed the meeting the same way: He said the stock performance was not up to the high standard for Under Armour. He went on to say that the company has a fully committed team working hard to provide value for its shareholders.
Shareholders should be reminded that Under Armour is still a relatively young company that has the advantage of still being founder-led. The shareholder meeting left me feeling encouraged that the founder, Kevin Plank, and the management team still had the humble and hungry spirit of a start-up, but with the focus of a mature 21-year-old company.
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