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Under Armour Goes to Damage Control Instead of Gold in Sochi

February 18, 2014

Under Armour Goes to Damage Control Instead of Gold in Sochi

USA's Shani Davis competes during the Men's 1500 meter speed race at Adler Arena during the Winter Olympics in Sochi, on Feb. 15, 2014. Photographer: Harry E. Walker/MCT via Getty Images

Instead of going for gold at the Sochi Winter Olympics, Under Armour Inc. (UA:US)has gone into damage control.

The poor performance of the American speedskating team, wearing the Baltimore-based company’s scientifically designed bodysuits, undercut the apparel maker’s claim that its clothing makes the best athletes even faster. The U.S. team voted to revert to older Under Armour (UA:US) suits to improve its performance, and still hasn’t won a medal.

While other squads wearing its products have had success -- the American team’s bronze was the country’s first medal since 1952 in the two-man bobsled -- Under Armour was forced to defend its products while being careful not to criticize athletes including four-time speedskating medalist Shani Davis.

“Whether it’s an equipment or design fault or not, in this case perception is reality,” Robert Passikoff, founder and president of New York-based marketing firm Brand Keys Inc., said in an e-mail interview. “Particularly when they’re some of the best athletes in the world, having consumers question whether your products are meeting their expectations is never a good thing for a brand.”

Under Armour also lost Olympic champion skier Lindsey Vonn, an endorser and a high-profile medal contender who was sidelined by knee surgery before the Sochi Games.

More coverage of the 2014 Winter Olympic Games in Sochi

Matt Mirchin, Under Armour’s executive vice president of global marketing, said in a telephone interview from Baltimore yesterday that he doesn’t think the poor speedskating results or the uniform change will hurt international expansion.

Sales Growth

“I don’t believe it will slow our international growth in any way, shape or form,” Mirchin said, adding that Under Armour was happy to accommodate the speedskaters’ decision to change uniforms even though “we strongly feel the suits did not contribute” to the disappointing results.

Under Armour rose 1.39 percent to $107.48 at 11:01 a.m. in New York today after falling 2.4 percent on Feb. 14, the last day of trading before the three-day the last day of trading before the three-day U.S. holiday weekend. The market closed a few hours after the speedskaters voted to change to suits they used during pre-Olympic competition.

The company’s stock more than doubled in the 12 months through Feb. 13, compared with a 20 percent gain for the Standard & Poor’s 500 Index, with Under Armour’s image as a purveyor of technically advanced clothing fueling more than a doubling of sales in three years.

Overseas Push

The company has been on a roll as it competes for a share of the athletic apparel market with companies such as Nike Inc., the world’s largest sporting goods maker. Under Armour has had 15 straight quarterly sales gains of more than 20 percent and it’s pushing overseas to continue that pace, including deals with soccer teams in Mexico, Chile and the U.K.

“You’re always going to have good days and you’ll have days that you face adversity,” Chief Executive Officer and founder Kevin Plank said in a Feb. 14 interview with Bloomberg Television. “We’ve got a big push in global, we’re going to grow, and I don’t see a real parallel between what’s happening right now and what’s happening with Under Armour on the global scene.”

U.S. speedskaters also were on a roll as they entered the Sochi Olympics, where they were expected to compete with the Dutch for medals in many of the 12 races. Instead, the U.S. -- which won four speedskating medals at the 2010 Vancouver Games - - has been shut out through the first nine events, and no American skater has finished better than seventh.

Davis Disappoints

Among the biggest disappointments was Shani Davis, who came in as the two-time defending champion in the men’s 1000 meters and with two straight silver medals in the 1500. He placed eighth in the 1000 in Sochi, and 11th in the 1500.

“I’m not necessarily sure what is to blame,” Davis told reporters after the 1500.

Meanwhile, the Dutch have won six golds and 19 of the 27 speedskating medals so far. They went 1-2-3-4 in the women’s 1500 meters, a race in which Americans Heather Richardson and Brittany Bowe were considered medal contenders and finished seventh and 14th.

“The coaching staff and Under Armour have bent over backwards for us, and I’m sure they haven’t slept much over the last week,” Bowe told reporters after the race, adding that she had no idea whether her bodysuit had anything to do with the result. “I am not the brains behind the skinsuit. I just put on what I am given.”

Another Sweep

The Dutch got another sweep today in the men’s 10000 meters, with winner Jorrit Bergsma breaking the Olympic record by more than 14 seconds.

The fact that U.S. speedskaters fared no better after switching out of their Mach 39 suits -- which Plank said were developed in conjunction with defense contractor Lockheed Martin Corp. (LMT:US) and were the fastest suits in the world -- could ameliorate any brand damage to Under Armour.

“For a high-performance brand suiting a high-performance team with multiple gold expectations, this is pretty damaging,” said Bob Dorfman, executive creative director at San Francisco’s Baker Street Advertising. “The good news, if you can call it good, is that Shani Davis and Heather Richardson both failed in the 1500 even after switching out of the new bodysuits. So maybe it’s not the suits, maybe it’s the athletes.”

Dorfman added that “it certainly would have been much worse for Under Armour if this happened to their NFL gear” instead of in speedskating.

Other Sports

“This is a very esoteric sport, not an event your average weekend jock follows closely, or bases their equipment purchases upon,” Dorfman said in an e-mail interview. “And in another week, we’ll all have forgotten about Winter Olympic sports and have moved on to the NBA and MLB.”

The company’s products are used by athletes such as National Football League quarterbacks Tom Brady and Cam Newton, and Stephen Curry of the National Basketball Association’s Golden State Warriors.

Dutch long-distance speedskating coach Jillert Anema said the problem is not with the Under Armour suits, but that the Americans’ lack of confidence “is growing like a cancer on the team.”

Under Armour also is outfitting the Canadian snowboarding team and U.S. bobsled and skeleton racers at the Sochi Games. The Canadian snowboarders have two medals in five events so far, and the U.S. bobsled team of Steve Holcomb and Steve Langton got bronze last night for the first Olympic medal in the two-man event by Americans since 1952.

Holcomb, 33, also is a medal contender in the four-man bobsled event set for Feb. 22-23 in which he is the defending Olympic champion.

Best in World

American Matthew Antoine, who won a bronze medal in the skeleton three days ago, said in an interview that he is “absolutely pleased” with his Under Armour uniform and U.S. skeleton head coach Tuffy Latour called them “the best suits in the world.”

“Teaming up with Under Armour was the best move we ever made, and they create custom suits for our skeleton athletes and they fit well and are proven to be fast,” Latour said. “I have nothing but good things to say about our speed suits.”

Still, the speedskaters’ poor performance in Under Armour suits could hurt the company’s image, said Passikoff, whose company has worked with firms including Samsung Electronics Co., Burger King Worldwide Inc. (BKW:US) and American Express Co. (AXP:US)

“It is an absolute fact that brands that do meet expectations always do better than those that can’t,” he said. “You know what they say: ‘It doesn’t matter whether you win or lose, it’s where you place the blame!’”

To contact the reporter on this story: Rob Gloster in Sochi at rgloster@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net


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Companies Mentioned

  • UA
    (Under Armour Inc)
    • $64.25 USD
    • -0.09
    • -0.14%
  • LMT
    (Lockheed Martin Corp)
    • $181.33 USD
    • 0.66
    • 0.36%
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