Under Armour Continues Down Path to Being the Next Nike

Under Armour's (UA) CEO Kevin Plank is notoriously no fan of Nike (NKE) , but his red-hot athletic-wear company is actually morphing into its most hated rival in one way: How much it charges for its newest, hottest sneakers.

Recently, Under Armour unveiled a limited-edition training shoe called UA Architechs, which feature components made by 3D printers. Talk about limited-edition. Only 96 pairs of the UA Architechs will be made. The price? A cool $300, which is light years removed from the mostly $85 running sneakers Under Armour sold when it entered the footwear space back in 2008.

In January, Under Armour released its first-ever "smart" shoe, the UA SpeedForm Gemini 2 Record-Equipped. For $150, a person could slip these kicks on -- which are embedded with a fitness tracker -- to accumulate and store data from a workout. The sneaker even offers up an alert for when a person should purchase a new pair (usually after 500 miles).

With its brand on fire, thanks to the success of athletes such as Steph Curry, Jordan Spieth and Cam Newton, Under Armour seems to be trying to capitalize by charging more for its sneakers.

To celebrate the birthday of its superman-like sponsored athlete Steph Curry on March 14, UA created the Curry Two Surprise Party. The sneaker's soles are decked out in bright birthday sprinkle colors. The price? A mere $130, which is $10 more than the Curry One that originally launched in February 2015. The birthday-inspired sneakers come on the heels of Under Armour dropping a special pair of all-star edition Curry shoes last month, also for $130.

"With Under Armour blowing out of Curry sneakers [at retailers], they are trying to charge a little more," said Sam Poser, a veteran footwear industry analyst and managing director at Sterne Agee. Poser added that although some of Under Armour's latest footwear offerings may cost more than past ones, they are still priced well below Nike's Jordan line, where sneakers tend to fetch between $170 to $220.

Similar to what Nike did with NBA great Michael Jordan, Poser expects Under Armour will eventually launch lifestyle shoes under the Curry brand.

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So far, Under Armour has found no resistance to its pricier footwear.

Alongside the strength in footwear, demand for training gear and golf apparel led to fourth-quarter earnings coming in at 48 cents a share, besting estimates for 46 cents a share. Total revenue clocked in at $1.17 billion, higher than forecasts for $1.12 billion. Under Armour's footwear sales in the fourth quarter surged 95% year over year to $167 million. For the full year, footwear sales increased 57% to $678 million. Footwear now makes up about 17% of Under Armour's business.

According to Under Armour, it now has more than eight running-sneaker styles priced more than $100.

In 2016, says Plank, Under Armour will double the number of running footwear styles priced over $100, led by its Slingshot and Slingride lines. Said Plank on a Jan. 28 call with analysts, "We've learned a tremendous amount over the last year of what we can do in signature basketball products, and feel incredibly bullish about our ability to continue to raise average selling prices going forward."

According to a source, Jordan Spieth's new golf shoes -- priced at $179 -- will debut at an event being held in Austin, Texas on March 21, ahead of the Masters Golf Tournament next month. Pre-orders for the Spieth shoes appear to be strong. Under Armour's website says it's sold out of them.

"I think it makes sense to tap into the premium footwear market as they put more technology, quality and features into the footwear assortment," said Mizuho Securities specialty retail analyst Betty Chen via email. Chen rates Under Armour a buy with a $95 price target.

Charging higher prices for footwear should boost the profitability of the business for Under Armour. Historically, Under Armour has said its profit margins on footwear have been well below those of apparel. Under Armour does not break out its profits by line of business.

"We're definitely seeing improvements in the footwear margins in general," said Under Armour CFO Brad Dickerson on the call with analysts, adding, "so we do anticipate still a lot of room on the footwear side [to improve margins], a lot of that will come from our ability to sell more at premium price points specifically in categories like running and basketball, which are historically our higher-margin products."

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