By Lorraine Mirabella, The Baltimore Sun
June 7, 2014
Under Armour, which has wooed consumers with sweat-wicking T-shirts and other innovations, is banking on a new fabric that conforms to the foot like a second skin to help the company break into the crowded athletic shoe market.
The Baltimore-based athletic wear maker is promoting its newly developed ClutchFit — a lightweight, stretch material designed to move with the foot without bunching or binding — as one of its latest innovations. And it's betting the technology will revolutionize shoes across multiple sports and pay off in a bigger share of the booming footwear market.
But experts say it's too soon to tell whether the latest footwear will boost the brand's small but growing shoe business, a 13 percent piece of the company's $2.3 billion in annual sales.
ClutchFit-designed shoes began showing up in stores in March in this year's version of Under Armour's Highlight football cleats. Sports fans got a first look at the basketball shoes, to debut for the back-to-school season, when point guard Stephen Curry of the Golden State Warriors wore a pair during the NBA playoffs.
This month, the brand is rolling out the ClutchFit Force soccer cleat and Spine ClutchFit running shoe. A new metal baseball cleat, an attempt to get a bigger share of the high school athlete market, will be released during the MLB All-Star Game this summer and in stores by August.
And ClutchFit's hourglass-patterned material also will make its way to base layer T-shirts, leggings and shorts by August and to other apparel and accessories later, said Josh Rattet, Under Armour's vice president of footwear for team sports.
"The premise behind ClutchFit is this revolutionary second-skin kind of material that flexes under pressure," with the ability to conform to the foot or body and become thicker, rather than thinner when stretched, Rattet said. "It really locks you in when it matters most … and has the right amount of give when needed. This innovative product will definitely be involved in our future growth."
"It doesn't just fit you … it fits how you move," according to marketing materials for ClutchFit, which Under Armour began developing in its "innovation lab" nearly two years ago.
The material is among the new synthetic textiles emerging in the athletic footwear industry to replace the traditional shoe uppers of leather, canvas, nylon and cotton, said John Brilliant, founder and publisher of CounterKicks, a website that covers the sneaker industry.
Such textiles "have more advantageous performance benefits by not breaking down and wearing thin in high stress areas of the foot or sneaker as they have in the past," Brilliant said in an email.
In what he called the new golden age of sneaker innovation, "Baltimore's Under Armour is certainly a player."
The launch of ClutchFit shoes follows Under Armour's debut of its Speedform Apollo running shoe in February, an update of a version released last year as Under Armour tries to capture a bigger share of the running category dominated by larger brands such as Nike.
The updated Speedform has drawn a favorable response from retailers, said Sam Poser, an analyst with Sterne Agee in New York.
"We think the company will succeed in footwear," Randal J. Konik, a New York-based analyst for Jefferies, said in a report Thursday. "After many years of trial and error and limited success, we believe [Under Armour] is on the verge of a breakthrough with its Speedform," which he said helped drive the company's 41 percent increase in footwear sales in the first three months of the year.
Under Armour got its start in apparel and is much better known for it than footwear. It entered the shoe market in mid-2006 with football, baseball and softball cleats, but has sold non-cleated shoes only since 2008, starting with training shoes, followed by running and basketball shoes. It continued the push into running last year with the first generation of Speedform.
Besides international growth and sales to women, Under Armour sees some of its greatest potential in the athletic footwear market. It has so far made only a dent, with a less than 2 percent share of a market dominated by rivals Nike, Reebok, Converse and others.
"We all know how competitive the market is, with [rival] brands 100 percent focused on negating our ability to grow," Rattet said. Under Armour intends to boost its market share, he said, by "giving consumers an experience they are not currently getting. We're going to be a significant player globally. …The appetite is there. The innovation pipeline is robust."
Analysts said the company's roots and skyrocketing growth in apparel give it the ability to capitalize on other growth areas, including footwear.
Though "they're still gaining credibility in footwear, they're working very methodically on trying to get stuff going," Poser said. "They've done a good job in cleats, but on non-cleated it's still a work in progress."
Sales reports for May offer a glimpse of the market and challenges ahead for Under Armour. Combined, the brands Nike and Jordan, which is owned by Nike, grabbed more than 90 percent of total basketball shoe sales, which jumped 27 percent, Poser said in a market report Friday. In running, 60 percent of sales went to Nike.
Rattet said the new Highlight cleats and the ClutchFit Force soccer cleats will be sold at Dick's Sporting Goods and through online sites and catalogs, while the running shoes will be sold only at Finish Line and through Under Armour's stores and online site.
Starting with limited distribution channels makes sense, according to Poser, who said the hype of new ideas in footwear, from all brands, often doesn't translate to sales right away.
"They would much rather sell out and know they have a winner than put out a ton of pairs and don't meet up to expectations," he said. Additionally, "If you want to get your shoe placed, something else comes out. Under Armour has to take money away from Nike or Jordan or Asics, and that's difficult to do."
Under Armour is up to the challenge and sees itself boosting market share by going after the $6 billion global soccer market as well as basketball and running while continuing to expand an already strong market share in football and baseball, Rattet said.
Konik, who upped his Under Armour stock rating to a buy on Thursday, said part of the Under Armour sales he pegs at reaching $15 billion in a decade will come from footwear, running in particular, where shoes a have a higher profit margin than cleats.
Under Armour "is at the tipping point of establishing itself as serious footwear player," Konik said. "We believe as the footwear business grows, it can stimulate incremental apparel sales and vice versa."
Besides footwear, he believes the company will benefit from strong athletic apparel trends and the brand's growing popularity with children and women.
Yale Schalk, executive editor of the CounterKicks website, said he was sent a sample of Under Armour's Spine ClutchFit running shoe to try out last week.
"It's a very light shoe, very form-fitting," Schalk said. "It fits very close to your foot, so when your foot flexes, the material doesn't bunch, which is always a plus. I really think they believe strongly in it because they're introducing this across their entire footwear line."
The shoe, sold at Finish Line for $99.99 starting this month, fits an industry trend toward lightweight and form-fitting performance-based shoes, he said.
"These days, performance and fashion are completely intertwined," Schalk said. "It's almost performance as fashion, and people will look for anything considered performance. [Under Armour] knows they have to strike a balance between performance and the aesthetic of the shoe. They're not Nike, they're not Adidas. In some ways they're still trying to hit their stride. I kind of think this is their best bet at this point."
Copyright © 2014, The Baltimore Sun