Muscling Up in Sports Gear

Under Armour's cool fabrics may yet make the swoosh sweat.


Marshall Bassett entered Under Armour's recently christened flagship retail store just like anyone else who pulls into the Westfield Annapolis Mall in Maryland. He walked through the tunnel of faux-concrete panels, passed by beefy mannequins in tight-fitting gear, and descended a short flight of arena-inspired steps. There, beneath a 15-foot ceiling of exposed steel beams—designed to resemble the innards of a college football stadium—he faced a 4,500-square-foot expanse of Under Armour merchandise: long-sleeved mock turtlenecks, raspberry pullovers, football cleats, running shorts, winter jackets, golf shirts, sports bras, sunglasses, backpacks, and water bottles.

But Bassett didn't come to shop. He's a chief investment officer at asset manager Delaware Investments in Philadelphia, a longtime Under Armour investor, and came for a firsthand look at the new operation. The company has 14 outlet locations, but this is its only self-branded store offering full-priced products. Bassett soaked in the hard-thumping music and images of gritty ballplayers dashing across a 120-inch projection screen. "I like the energy," Bassett says. "But it doesn't matter what I think. It matters what the kids think."

After only 11 years of existence, Under Armour has muscled its way into the fiercely competitive athletic apparel business and established itself as one of the hottest new brands in recent memory. Through the popularity of its trademark moisture-wicking microfibers, Under Armour has revolutionized athletic apparel while stitching its logo into the fabric of high school and collegiate sports. The upstart label is mounting a major challenge to the Nike swoosh for supremacy among the 10-to-20-year-old set. "It's shaping up to be the brand of the next generation," says Reed Anderson, an analyst at D.A. Davidson.

Pay dirt. Such outsize expectations have been fueled by Under Armour's recent financial performance. Anderson expects the company to post 2007 earnings of $51 million, up 29 percent per share from 2006, its first full year as a public company. He projects 2008 earnings per share to jump an additional 28 percent. Although higher inventories—and an overall sour stock market—have hurt its stock price recently, shares are up 270 percent since going public.

But now, as Under Armour looks to sustain its breakneck pace of growth, it will be forced to penetrate new markets with fresh products. "Our growth strategy is simple," says Chairman and CEO Kevin Plank. "Make women's apparel larger than men's apparel, make footwear larger than apparel as a whole, and then take those three product categories country by country and tell the message across the world."

Given such lofty ambitions, it's easy to overlook Under Armour's humble inception. After years of frustration with cotton T-shirts—which retained water and became heavy underneath his football pads—Plank declared war on the traditional American undershirt in 1996. It was then, after completing his football career as a special-teams player at the University of Maryland, that Plank, now 35, took $500 and several yards of coat lining to a local tailor, who eventually produced the first seven Under Armour prototypes. The snug-fitting fabric succeeded in sucking moisture away from the body, keeping athletes dry. As the shirts' popularity spread, "I realized this was a much bigger opportunity," Plank says.

Plank ramped up manufacturing capacity, persuaded collegiate athletic trainers to buy his products, and got former teammates playing in the NFL to wear them. As the brand's visibility and performance improved—Under Armour now says its products can lighten a sweaty athlete by about 3 pounds—demand mushroomed. Today, Under Armour is the official supplier of four Division I college teams and sells to more than 300 other universities. Its products can be found across North America, Europe, and Japan. "This brand uncovered a tremendous amount of demand that nobody knew existed," says Omar Saad, an analyst at Credit Suisse.