- Scott Dalton / Invision
Under Armour has reportedly upset Dick’s Sporting Goods after it started working with Kohl’s, according to WSJ analysis. Department store Kohl’s is known for aggressive discounting. Analysts say the Under Armour and Kohl’s partnership has diminished Dick’s ability to sell at full price.
Once upon a time, things were good.
But in recent times, Dick’s lagging sales are no longer enough to satisfy the hungry Under Armour. As sales sagged, it needed new partners to return the brand to growth.
To revive sales, Under Armour turned to Kohl’s, the promotion-heavy mid-tier department store.
Under Armour CEO Kevin Plank said selling at Kohl’s was “great evolution” for the brand and a “massive opportunity,” in an earnings call earlier this year.
But Dick’s, which accounts for 10% of Under Armour’s 2016 sales, reportedly isn’t too happy about that, according to the WSJ.
In its latest earnings call, Dick’s said discounting, “increased distribution,” and aggressive pricing by “competitors” forced the company to lower forecasts for the rest of the year.
The most notable recent competitor? Kohl’s, known for its aggressive discounting.
Kohl’s selling the same Under Armour gear at cheaper prices diminishes Dick’s ability to sell the items at full-price.
Under Armour selling there weakens Dick’s ability sell at full price. UBS wrote in a note that it saw “signs that the Kohl’s launch caused increased markdowns across the (athletic wear) channel.”
- Under Armour Facebook
Under Armour was originally looking for somewhere to replace the shelf space it lost after Sports Authority liquidated.
The theory was for Under Armour to sell unique, cheaper merchandise at Kohl’s that would still give customers a reason to go to places like Dick’s to get the genuine article. It seems this didn’t happen as much as Dick’s would have hoped.
“Within men’s and women’s apparel, 50% maybe a bit more) of the styles are also available at Dick’s [Sporting Goods],” an analyst with Susquehanna Financial wrote in March.
In response, Dick’s has created a price-matching program for all competitors selling identical items. Under Armour said so far this year, no retailer has accounted for more than 10% of sales.
Dick’s is also aggressively moving into the private label space, which may make shelf space more scarce for brands like Under Armour – especially if they start to underperform.
Whatever boost Under Armour gained from selling at Kohl’s wasn’t enough to give it a sizable bump, as the brand still posted a sales loss in its latest quarterly earnings report.