It is an understatement to say that Under Armour (UAA) has been underperforming over the past year. The stock price has been beaten down so badly that it went from a growth company – “the next Nike” – to the poster child of a turnaround play. What are the odds of an Under Armour turnaround this summer?
To answer this question, let’s start with the main driver of the current Under Armour fiasco. Under Armour’s stock has been performing poorly since the fall of 2015. The main culprit, beyond missing fashion trends in its apparels, as acknowledged by its CEO Kevin Plank, is that its sneakers, in particular Stephen Curry’s signature sneakers “Curry 3” have not been selling well.
Curry 2 did well – in 2015, the Golden State Warriors won the NBA championship. Curry 2 were carried by the wind. In the next NBA regular season, Stephen Curry made record shattering 402 3-point shots and the Warriors won a record 72 games. The success of the Warriors and Curry peaked by the time the Warriors lost to LeBron James’ Cleveland Cavaliers in the finals.
Along with the championship went the success of Under Armour’s Curry sneakers. “Curry 3”, introduced that summer, was a failure – for its design, and perhaps more importantly, for losing the cool of being worn by an NBA champion.
What about this year? How will Curry 4 perform in the market? Can this pair of sneakers turn around Under Armour’s lackluster North America sales?
The success can hinge on the next one, two, maybe three NBA finals’ games. And here’s some more important evidence suggesting the likely success of Curry 4.
The following chart shows the Google search trends for Curry sneakers, from the first generation to Curry 4.
Since search index tends to be closely associated with consumer interests (and hence sales), if history is any guidance, Curry 4 (the red line) will almost surely outperform Curry 3 by a wide margin, matching and possibly beating the success of Curry 2. Of course, this trend can be helped or dampened by Steph Curry’s performance in the next a few games. While it appears Kevin Durant will be the Final MVP (if the Warriors win), a strong Curry performance would be sufficient to bring Under Armour’s lackluster sneakers business out of the gutter.
When more search data becomes available, we should be able to tell with a higher level of confidence how much bigger a success Curry 4 can be beyond the success of Curry 2 (the green line).
If sneakers sales start grow again, for Under Armour, it will be turnaround time.
Disclosure: At the time of publishing this article, I own Under Armour shares.