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From rags to microfiber: inside the rapid rise of Under Armour

The stretch of I-95 that loops around Baltimore City reveals an unremarkable panorama of brick buildings, industrial cranes and shipyards. Then, as you drive along, you pass by an enormous billboard advertising a modern-looking running shoe, put out by Under Armour, the company whose sleek workout gear has redefined the modern sports apparel market. Why such a prominent shoe ad in that spot? Because UA's shoe lines, and all its other products, are being designed and fabricated just off a nearby exit.

Under Armour's headquarters, set on a sprawling 13-acre waterfront compound known as Tide Point in the neighborhood of Locust Point, was home to a Proctor & Gamble soap factory for more than 80 years. The compound's industrial brick exterior still retains the gritty appeal of a turn-of-the-century manufacturing district. It was a romantic image of blue-collar America that first enticed Under Armour's founder Kevin Plank to move his small T-shirt business from the basement of his grandmother's suburban D.C. dwelling in Georgetown to the crab capital of the world.

"There's such a heritage of toughness and hard work in this town," says Plank. "Baltimore has been a terrific home for us."

Now a $700 million operation, employing more than 2,000 people worldwide with offices in Denver, Toronto, Japan, China and Amsterdam, Under Armour is the story of one man's fight against the evils of cotton, and how his success turned the sports performance apparel market into one of the most competitive new territory of our time, spawning a host of imitators, all trying desperately to sop up the sweat.

Plank is that enterprising friend we all had growing up, the kind of person who as a mere 23-year-old could believe he had identified an untouched market and was so convinced that it needed to be tapped that he emptied his wallet into developing prototype products, handing out business cards to whoever had fingers to grab them, engendering incredulous grins from business heads twice his age, all the while hoping someone in the universe would hear his bellowing cry: What the world needs now is moisture wicking technology!

"I was always the guy who was good at putting a group of people together to believe in one common vision or idea," says Plank. "If school would get canceled for snow, I was the kid who would grab my shovel, go out, and shovel snow. I've always had a pretty big motor."

Plank was raised in an industrious middle-class family His father worked as a land developer. His mother held the office of mayor in Kensington, Md., for 13 years. Later she moved to the State Department and worked under presidents Ronald Reagan and George H. W. Bush.

The youngest of five brothers, Plank needed physical skills to survive when his parents weren't home. "My brothers used to give me wedgies and stick me in a closet. That was their idea of babysitting," says Plank. "The idea of being athletic -- you really didn't have any choices if you wanted to get off the coat hanger they'd stick you on. And waiting for your underwear to rip was never fun."

When it came to sports, football was a passion. Plank attended St. John's College High School in Washington, D.C., where he played on the varsity squad in the competitive Washington Metropolitan Athletic Conference (WMAC). But he wanted more than the fleeting glory of a high school career.

"I wanted to play big-time college football," he says. "After I finished at St. John's I wasn't getting recruited from programs and I was talking to Division III schools, so I decided to go to a prep school. I was young when I graduated. I had just turned 17. I probably could have used another year, so my parents sent me to Fork Union Military Academy."

The academy was known for churning out all-star talent and graduating NFL hopefuls to top college football programs. It was here that Plank made the contacts that, a few years later, would form the foundation of his customer base.

"In that one high school class I think we had 23 guys sign on for Division I-A," Plank says. "Thirteen guys ended up being drafted to play in the NFL. We had one Heisman Trophy winner, Eddie George, in our class." Plank ended up being a walk-on at the University of Maryland in College Park.

It was at Maryland that Plank first became interested in athletic apparel. He was special teams captain, and playing at a level previously unmatched. In a story central to the Under Armour lore, Plank grew tired of the buckets of sweat that accumulated in the cottons he wore to practice and on the field.

"I was short and slow -- I was looking for every second I could spare," he says. "Even if it was raining outside, [the sweat-soaked cottons] gave me that slowed-down lethargic feeling."

It was the early '90s. Cottons still dominated the apparel market. The sporting goods world didn't yet know it, but Plank was steadily working out a solution that would deliver them from the dark ages of moisture-soaked workout gear. Plank become one of those insomniacs, staring at his bedroom ceiling, kept up at night by the big question -- in his case, how he could come up with a more practical fabric.

While his former teammates continued to suit up for spring ball, Plank now occupied his time running up the street from College Park into neighboring Beltsville, Md., to try out fabrics at a local tailor shop. There he would browse synthetic materials, eventually finding a few favorites, hoping to test his hypothesis. Spending $500, Plank ran through seven prototypes before deciding on the one he wanted to use. He would ask his former teammates to try on his prototypes, They greeted his invitation with some hesitation. Plank told them it was for a job he had, and he wanted their input.

"It was all about making yourself bigger than you were," Plank says. "My first goal was getting athletes to believe in the fact that they needed an alternative to a basic cotton T-shirt. The way you do that is with a great product, but you also do it with influencers."

Those influencers included good friend Jim Druckenmiller, then a 49ers backup quarterback and, according to Plank, a town crier in his locker room for the fledging Under Armour brand. As Plank's friends moved on to play professionally, he would send them T-shirts, requesting that they pass them out to other players in their locker rooms.

"I called Frank Wycheck, basically because he'd take my call," Plank says. "It was a lot easier to get a hold of Frank than it was Jerry Rice back then. I put packages together and sent them to the 30 guys I knew."

One of the first big media plugs Plank recalls was a front-page photo in USA Today. Jeff George, then playing for the Raiders, was featured wearing his team's uniform with an Under Armour mock turtleneck. The added excitement for Plank was that George was not one of the players he had even sent gear to.

"I remember thinking it's going to be a big day," says Plank. "The phone rang three times. One was from my mother telling me I still had to get this stuff out of my room at home. It taught me that there is no such thing as an overnight success. You have to get up and put your work boots on every single day."

To infiltrate locker rooms on the college level, Plank had to adopt a different business approach. To be successful, he would have to corner entire teams. His first major sale came when an equipment manager from Georgia Tech acquainted with the T-shirts contacted Plank. Asked how many he needed, the manager responded "350." Plank could only afford to send him 60 at the time, simply because that's all he had. At this moment he saw that his vision was on its way to becoming a cash cow.

The deal with Georgia Tech opened the door to a contract with N.C. State. Word began to spread, fashioned by positive reviews passing over the lips of players. After a Florida State game an equipment manager for the Atlanta Falcons, a Florida State alumnus, visited the equipment room where he saw players wearing the Under Armour shirts. Plank recalls the conversation.

"I'm sitting in grandma's basement in Georgetown, and the phone rings," he says. "The guy says, 'I'm the head equipment manager for the Atlanta Falcons and we want to buy your shirts.' Then the Falcons played the Giants. There, the equipment guy for the Falcons was a mentor to the equipment guy at the Giants and he liked our stuff."

Getting Under Armour gear in the locker rooms at his alma mater proved to be a particular challenge, because of Maryland's long-standing relationship with Nike. Ron Ohringer, head equipment manager for the Terrapins, recalls that Plank gave him some samples, and he was impressed by the way the microfiber didn't hold moisture and helped cool the players. "We liked the product, but at the same time contractually we couldn't use it," says Ohringer.

When the time came for Ohringer to find a mock turtleneck undergarment for the team, though, Nike couldn't provide an adequate product in the team's red color. Plank took the opportunity to step in, even if the team could not display the Under Armour logo.

Ohringer is firm that the team's current commitment to Under Armour had nothing to do with returning a favor to an ex-Terrapin. The door of opportunity in fact was only left partially open.

"When our contract was up, we tried to work it out so we still wore the Nike shoes," he says. "We didn't want to severe our relationship with them. Everybody played nice and it worked out well."

Now, with a decade plus of networking, consensus building and new product development, Under Armour has corralled a star-studded stable of athletes to promote its products. All-Pro linebacker Patrick Willis of the San Francisco 49ers says, "I was a big fan when I was in college. This is what I wanted to be a part of because it was new and upcoming."

A company spokesperson says that part of Under Armour's brand appeal is that its customers think it's cool, describing UA's sweet spot demographic in the 12-18-year-old range, a sentiment echoed by Bob McGee, editor of Sporting Goods Intelligence.

"The kids are plugging in and clearly the parents are buying them. The kids who did not grow up with these bigger brands think Under Armour is the hot performance brand for their undergarments."

Jeff Mintz, vice president of research for footwear and apparel & sporting goods at Wedbush Morgan Securities, agrees that exploiting the generation gap has been a viable strategy for Under Armour.

"I think they've been successful with a younger generation of customers," Mintz says. "They've created this perception that Under Armour is the younger generation's brand and that Nike is your father's or older brother's brand."

Even Hollywood has not been immune to Under Armour's siege of young America. When the TV series Friday Night Lights first appeared on NBC in 2006, Under Armour was granted the right to heavily promote its brand label on the uniforms of the Dillon Panthers, a fictitious high school football team in a character-driven story following the fortunes and failures of the people in a small Texas town and their obsession with football.

It should then come as no surprise that a company which prizes youth keeps its halls filled with young worker bees and ex-athletes. The average age of its employees is 30. People certainly want to work there: In 2008 about 26,000 resumes were received; only 215 were hired.

The company says its operations steer toward the unconventional. Unlike many other firms, all campaigns and creative design are done on the property. No contract agencies are involved in business operations. There are also no grand facilities to wear-test products, except for a turf area to test some aspects of shoe performance. The company says it prefers to use real-world conditions, including terrain differentiation and weather factors, while receiving feedback from various running clubs and their stable of athletes.

But while the talk remains positive, thanks largely to a 20 percent increase in profits between 2007 and '08, Plank and associates may not want to uncork the champagne bottles yet. In early January, Under Armour was forced to repeal its earnings guidance by 13 percent. A company statement blamed less than anticipated online sales and cancellations in the U.S. wholesale business. Plank told SI that despite what's happening in the economy, he doesn't allow for any "loser talk" to darken his door.

"One of the biggest things for them is to control expenses and make sure that they don't overspend in this environment," says Mintz. "They have a pretty good balance sheet, so they don't have a lot of debt at this point. They can survive as long as they don't make the mistake of thinking they can keep spending like they've been spending before."

So Under Armour, which owns 74 percent of the market share in the performance apparel category, defiantly soldiers on. And despite severe economic turmoil and slumping retail sales, Under Armour broke into the running shoe category at the end of January, a niche that Plank described as "a $5 billion market versus the $300 million markets we've been entering before." Though McGee characterized it as a $3.2 billion market, he noted that even if Under Armour is able to lock in one percent, the payoff would be "huge."

Of course, this is a big "if." While fourth-quarter numbers for 2008 came in at $179.3 million in net revenue for an increase of 2.5 percent over the previous year, it still represented disappointing growth as the entire sports retail environment continues to reign in spending during the present economic downturn. Still, Plank's confidence stems from the business relationship he says that Under Armour maintains with its distributors.

Modell's Sporting Goods recently unveiled a large billboard in Times Square to promote the launch of Under Armour's new running shoe, a move that Rich Lampmann, director of promotions and PR, admits is hardly standard protocol.

"It's definitely above and beyond what we normally do," he says. "It's still very early to tell where it's going, but we're very positive. We've put a lot behind it and we feel Under Armour will be successful in what they do."

The economy will remain the great equalizer into the foreseeable future. And with Under Armour's running shoes projected to sell between $80 and $120, the question remains whether parents will shell out the big bucks to keep junior on top of his game as disposable incomes shrink.

"Hard to say," McGee says. "There's just a lot of entrenched running brands who have spent a lot of money and have niche audiences with hardcore runners."

In the end, however, Under Armour built its reputation on the strong foundation of the relationships it has made. And relationships might be the last thing that holds. Speaking in the context of the company's new running shoe, Plank seems to think it's still enough.

"Not too many companies out there with north of 93 percent of their business based in the United States can look at launching into a category that'll be a 100 percent allocated, where we have commitments that'll actually be sold for us," he says.

For Plank, whose success is undoubtedly linked to this subplot, it has been a familiar theme: It's not what you know, but who you know, that makes what you know matter. And Under Armour is hoping to be more than a footnote in the apparel wars -- a chapter brought up in the casual bar room banter among two friends, as one man, defending the honor of past gridiron greats, brazenly asserts in the same breathe how they might have been smaller but were just as tough because they were once encumbered by cotton.

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