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Adidas - We're Not Gonna Compete With Our Dumbest Competitor

Companies / Corporate News Feb 05, 2015 - 04:41 PM GMT

By: Bloomberg

Companies

Kevin Plank, Under Armour CEO, spoke with Bloomberg Television's Stephanie Ruhle this morning to discuss the company's acquisition of the MyFitnessPal and Endomondo apps.

When asked about the Adidas strategy of signing on athletes, Plank said: "Spending more money is no strategy, right? And we're not going to compete with our dumbest competitor either."


When pressed on whether Adidas is Under Armour's "dumbest" competitor, Plank said "Specifically, I don't when mind you quoting me. I didn't say it. But I don't like them. No, I like them. I don't like the other guys either but that's my job."

On the MyFitnessPal and Endomondo apps, Plank said: "Our goal with all these acquisitions was to sell more shirts and shoes. That is our core business. And so everything we do must come back to the core. So ultimately we think that if we can help athletes, help humans, help everyone find ways and make it easy for them to understand the information they are doing and to track their progress of how they are getting better, we think that they're going to buy ultimately more shirts and shoes."

On Under Armour's competition, Plank said: "We're not competing with Apple, we're not competing with Samsung. Is that this is not iOS specific, it's not Android specific. We're with everybody."

STEPHANIE RUHLE: Kevin, almost $600 million for two apps, apps that don't make any money yet. Are you jumping the shark, brother? What are you doing?

KEVIN PLANK: Well, first of all, there is an and norms opportunity in wearables in general. The energy around is something that is as big as we have seen. Coming fresh back off of CES, you just see the amount of energy and excitement around it.

But the thing we notice is that no one is a round community, the investment community. We started this journey of making these acquisitions more than a year ago with the acquisition of MapMyFitness in the December 2013. And what we learned with the leadership of Robin Thurston and our team there was that the things that we love was the community; the things that we didn't have was we didn't have nutrition and we didn't have a global perspective. So by buying Endomondo, based in Copenhagen, by buying MyFitnessPal, based in San Francisco, gives us an anchor in San Francisco, gives an anchor in Europe, that pan-global view, as well as we can aggregate the largest -- the world's largest digital fitness and health community in absolutely bar none. 120 million registered users.

RUHLE: How does that translate into you selling products?

PLANK: Right, so the thing we looked at is the one thing we know is that the more someone exercises, the more that they work out, the more athletic apparel, the more athletic footwear they're going to buy. Last month alone, we had over 100 million workouts logged into one of our four applications, between MyFitnessPal, Endomondo, MapMyFitness, and UA Record, which we launched last week -- last week at CES.

RUHLE: But no one is paying to log those. No one's making money.

PLANK: Look, there's -- what we want people to be understanding is that we want to drive value. So monetization, everybody says that look, there's an advertising model these guys have in place right now. Whether that's the right place for them to be or not, we don't know what it is yet, so I don't think advertising is going to be a place we'll drive.

There's a subscription model that is available. There is the ability for us just to push content. Last year, we had an ad with Misty Copeland and Giselle. We had 13 million YouTube views and it was extraordinary, the reaction, what it did for our women's business. We have 122 million registered users, 72 million of which are women. The ability for us to push content in the right way to speak to the athlete, and again, the more that they exercise -- and we know who is exercising, because they are voluntarily giving us this data to help to make them better, synthesize, make it easier, that is what we do.

RUHLE: Does that mean you are becoming a media/content company like what GoPro wants to do?

PLANK: Our goal with all these acquisitions was to sell more shirts and shoes. That is our core business. And so everything we do must come back to the core. So ultimately we think that if we can help athletes, help humans, help everyone find ways and make it easy for them to understand the information they are doing and to track their progress of how they are getting better, we think that they're going to buy ultimately more shirts and shoes.

RUHLE: Then are you getting out of the team sports business and into this health-wellness lifestyle?

PLANK: Yes, no, I think it's -- we're never going to depart sports. So everything we do, when we think about record, and again our (INAUDIBLE) growth driver since we went public in 2005, men's apparel, women's apparel, footwear, international, direct consumer. So right now it hits on all five of our growth drivers. So for men, there is a 16-year-old high school linebacker who's measuring themself in the doorjamb of their bedroom and saying did I get an inch taller this year or not? To have quantifiable data about making that athlete better.

For women's, as I mentioned, the 70-some odd million women that we have on the app right now. For our footwear business, there are people who log into MapMyFitness and they are tracking their footwear as to how many miles they put, the duration of the shoe they have. Our international business, we have 52 million people outside of North America that now have their first handshake with Under Armour is going to be in this digital capacity.

RUHLE: But are you changing your strategy? The last time you and I spoke you had just missed out on Kevin Durant. That was a $300 million price tag. Now you've spent $560. Was this a better move? Do you not want to pay for athletes anymore?

PLANK: Stephanie, we're constantly changing our strategy. We're constantly updating what we're doing. But we have core principles that drive the things that make us money: selling more shirts and shoes. We view this as the ability for us to sell a lot more shirts and shoes and, more importantly , to make athletes better.

There is this white space: and I got to go back to when I was a 22-year-old kid sitting there graduating from school and saying there is this idea that why do we wear a shortsleeved cotton t-shirt in the summer and a longsleeved cottong t-shirt in the winter? No one had ever addressed it before.

And my reaction was it was the white space that I said how come no one is making this? And so I went out and just went and took some material, made a couple stretchy t-shirts, tried them on my freiends, and we created this whole new category. This, to me, was one of those moments. It was one of those moments that I look and say, I understand that here's the next great device and here's (INAUDIBLE). Here's FitBit. Here's the new Apple watch that's coming out. But no one had addressed what is a community and who's synthesizing that information and making it easier?

RUHLE: Then re you getting out of your old category is my question. Because Nike and Adidas is who you are focused on, and we just heard from the Adidias CEO they could sign between five and 500 athletes.

PLANK: Yes.

RUHLE: What are you going to do, just chase one another to pay more money?

PLANK: Spending more money is no strategy, right? And we're not going to compete with our dumbest competitor either.

RUHLE: Is that what Adidas is?

PLANK: They will chase the old -- they will chase the old model. And we've got good competitors in our space, but we also see some things that are a bit irrational from the way we see. So chasing and bidding someone up is not the goal. The race to the bottom is not the goal that we have. So that we think that in order to spend our money you will still see us go after the right assets, the appropriate assets. And we'll spend to get those assets. But you'll also see us take a different approach, which we think this is. This is a different voice, a different communication, a different handshake with the Under Armour consumer.

RUHLE: But is Adidas your dumbest competitor?

PLANK: Specifically, I don't when mind you quoting me. I didn't say it. But I don't like them. No, I like them. I don't like the other guys either but that's my job.

RUHLE: But are those guys now your competition? Or is your competition Google, Apple? I mean, now setting your sight in the tech world -- brother, you are in a very different place. Your background isn't technology. It is shirts and shoes. You're a football player, not an app guy.

PLANK: But let me give you the good news, is that we're not competing with Apple, we're not competing with Samsung. Is that this is not iOS specific, it's not Android specific. We're with everybody.

What I loved about MapMyFitness when we bought these guys back in December, and what we learned, was that they were completely agnostic. We work with over 400 different devices. So whether your are Jawbone or FitBit or Garmin or Sinto (ph), whatever the device you have, it will plug in and work with the Under Armour record platform and it already works with MapMyFitness or MyFitnessPal or Endomondo. This open platform is where we are setting the marks for, our 120 million that added 4.2 million people, new registrants, in the month of January alone, in 31 days of January, we averaged 136,000 people every single day signing up and joining our app. I mean, the scale is extraordinary. Do the math on what that could be. Extrapolate the numbers out. We have the largest athletic fitness community in the world today and it's only going to get bigger.

RUHLE: You mention of the race to the bottom. It makes me think of conversations I've had with Mickey Drexler, where he says that is where the retail landscape is right now. Do you agree?

PLANK: I think it is tough. Coming off of Black Friday where competition and discounting is the definition of everything, we're a full price brand. We have always been a full price brand. And our ambition is not to sell it at 10, 20, 30 off. So there's still --

RUHLE: But how do you avoid it at this point? Customers are addicted to it.

PLANK: Well they are but we haven't -- our customer's not trained for discount. I think that's what's happening at retail is that people are getting to trained to walk in, and unless you see 30 off, 40 off, when you're walking by some of these retailers, Abercrombie, and see 50 off from the door and saying how do you compete with that?

So it makes us -- it helps us -- it reminds us why we need statement retail. It reminds us, No. 1, that we can demonstrate for our accounts what we could look like, how good we can look in their stores, how they should be utilizing the Under Armour brand. But we are not a discount brand. We are technology company. We are an innovation company. When you come to Under Armour, you are not banning the basic dumdum $10 t-shirt. You're buying -- you're spending money because it is that good.

RUHLE: How about the challenges you can't avoid? The foreign exchange issues you face. As the U.S. dollar grows stronger, you are a victim. What can you do to protect yourself, especially now that you really care about the international market with your Endomondo acquistion?

PLANK: Well, it's one of the difficulties we have with a company that's about 9 percent of our revenues outside the United States. And , again, our definition, our goal that we have as a company, is to be a global company. Which means that more than half our revenues would some day come from outside of our home country.

We're a ways away from that happening and, frankly, because the way the tax laws are set up, we're frankly disincentivized to do that, because we have to go find and create international profits. Our effective tax rate just a few years ago was over 42 percent. So when we look at it, we think that, A, we're driving global revenues. And, again, for a company that has, you know, Europe crossed (ph) $130 million for the first time. We opened our 57 store in China this year, really getting behind and building a true global business and our international business was up 96 percent as a whole. So we're going to big and important on the global stage and, again, we are just adding started.

RUHLE: All right. Congratulations, Kevin Plank.

PLANK: Thank you, Stephanie Ruhle.

RUHLE: Hopefully, next time we sit down, I'll have beat you on Record.

PLANK: Let's do it.

RUHLE: Let's do it. All right, Betty Liu, I'm going to send it back to you. Kevin Plank, he's the founder, CEO, and Chairman of Under Armour.

Courtesy of Bloomberg Television

bloomberg.com

Copyright © 2015 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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