Q&A With Kevin Plank, Founder & CEO of Under Armour
Q&A With Kevin Plank - Founder, CEO and Chairman of Under Armour
Kevin Plank, Founder, CEO, and Chairman of the Board, Under Armour, speaks with Economic Club president David M. Rubenstein on Tuesday, November 27, 2018.
To listen to this podcast click here.
David Rubenstein: Thank you for sending over these nice shoes I got. And thank you for this. How come you’re not wearing any of them?
Kevin Plank: I’m a bit embarrassed, I’ll be honest with you. And you know they’re available on the website as well too.
David Rubenstein: Really? Okay. Alright. Well, thank you very much. They’re very comfortable and these are going to make me run faster, is that right?
Kevin Plank: Make you could jump a little higher, run a little faster and a lot more secure in your everyday living.
David Rubenstein: All right. Well, thank you very much, Kevin, for coming. You, obviously, have a big fan club and we’ve had a lot of people wanted to come to this because obviously, people admire a local boy who’s made good and let’s talk about the company that you started, Under Armour.
But first, before we talk about the company, let me ask you about some of the videos we just saw. You have some of the great athletes that you sponsored, take Stephen Curry, a great basketball player, you pay him a fair amount of money, I guess, to wear your shoes and he likes them. But if he comes over your house and wants to play horse, does he let you win because you’re paying him a lot of money every year?
Kevin Plank: I’d be troubled if I won a game of horse against Stephen Curry, that’d be a problem.
David Rubenstein: What about like you want to swim with Michael Phelps, does he let you win or no?
Kevin Plank: I don’t know if I’d try that.
David Rubenstein: What about Tom Brady? If he throws you the ball soft and things like that?
Kevin Plank: I think these guys have only one speed. I actually had the privilege of playing golf, it was one of those foursomes that you can only dream about. And I got to play golf with Jordan Spieth, who’s one of our golfers, Stephen Curry, and President Obama. And in that foursome, this is the way that I sort of approach sports and in that foursome, I was lucky enough to be paired with Jordan. Because Stephen is a scratch golfer, and President Obama doesn’t have a job so he has a lot of time on his hands. And unfortunately, Jordan would have needed impossibly close to a hole in one on every hole for us to be able to take the match so we gave that match back, but someday we’ll get our golf game back.
David Rubenstein: So, were you the best of the four golfers there?
Kevin Plank: By handicap, perhaps, but not even close.
David Rubenstein: Okay, so you how come you haven’t signed up Tom Brady’s wife, Giselle? She’s not an athlete?
Kevin Plank: She fits about every bill. But yeah, I think we’ve had a great relationship with Giselle and Tom. So, they’re a super couple and wonderful people and proud to have them wearing our gear whenever they exercise.
David Rubenstein: So, if you could be a great athlete like the ones you just mentioned, Michael Jordan or Stephen Curry or Michael Phelps or Tom Brady or you could be the CEO of an athletic apparel company, what would you rather do, be a great athlete or be the CEO?
Kevin Plank: I take CEO every day of the week. But maybe not every day of the week, but you have yeah, I don’t know. It’s actually that’s probably a better question than I gave you credit for. I mean, you still get hit like in sports. They still write about it afterward, what happens but you really have four games a year with earnings calls and all the work is done long before the press release, that’s for sure.
David Rubenstein: So, what year did you start Under Armour?
Kevin Plank: 1996 from about a mile from where we’re sitting right now, in a little row house in Georgetown on 35th Street.
David Rubenstein: When you started the company, did you ever think you’d build one of the biggest athletic apparel companies in the world?
Kevin Plank: I never believe we couldn’t do that. Like when I started, I don’t know, people begin with this massive vision at 22 or 23 years old, but my belief when I started was I was going to build the world’s greatest t-shirt for football players to wear under their pads. It was very much a distance of how far we could see and from there, we said when we make the best shirt for football players and what if we made long sleeve shirts and what if we made something for cold weather, in addition to warm weather? And it was really, it was one product at a time, one asked from the consumer at a time to satisfy a need.
David Rubenstein: Let’s talk about how you actually came up with the idea of starting a company. You grew up in Kensington, Maryland, a suburb of Washington.
Kevin Plank: Yeah.
David Rubenstein: And you went to high school at Georgetown Prep, which is a place where a lot of Supreme Court Justices have come out of recently, right?
Kevin Plank: Yeah.
David Rubenstein: So, did you ever aspire to be in the Supreme Court?
Kevin Plank: Well, we came to a mutual agreement to leave Georgetown Prep after my sophomore year not fully knowing about what was happening with the Supreme Court Justice process, but I then made the decision to go to the Christian Brothers at St. John’s my junior year of high school.
David Rubenstein: Okay. So, it was decided, you weren’t going to be an academic star, but you might be an athletic star?
Kevin Plank: I believe that I could do both but it was…
David Rubenstein: All right.
Kevin Plank: I took what I could get at the time.
David Rubenstein: You were a good football player.
Kevin Plank: I was a good high school football player.
David Rubenstein: Okay. And what positions did you play?
Kevin Plank: I played fullback and linebacker.
David Rubenstein: Okay, and so you get an authentic scholarship to college to play or not?
Kevin Plank: I did not.
David Rubenstein: So, initially, after graduating high school, you then went to where?
Kevin Plank: A place called Fork Union Military Academy.
David Rubenstein: Okay. And is that well-known for…?
Kevin Plank: Wow!
David Rubenstein: Were there a lot of other good football players there?
Kevin Plank: So, actually at Forking, it actually became really the impetus for starting Under Armour because between my high school team at St. John’s, we had a really good team. We won the city championship that year, we had about nine guys in our team that went on to play Division 1 Football. At the University of Maryland, there were 25 guys playing the NFL at any given time. At Fork Union, I went to this class and it’s a one-year Prep School class about 40 miles outside of Charlottesville, Virginia.
And in the class, we started with 135 guys on a football team, which is a one-year prep team that had 11 starting spots on each side of the ball. By the end of three days, in August, there were 65, roughly, people left on that team. Of that 65, 23 signed division 1A scholarships, 13 wound up getting drafted into the NFL and four of them became first-round draft picks and one guy won the Heisman Trophy, somebody named Eddie George.
So, the ability to start Under Armour was more of, oh my gosh. I’ve got this massive network of between high school and prep school and college of 40-50 friends of mine that were playing the NFL that had a shelf life of about three to four years, the time that they’d last in the NFL. So, what can I do to not be the obnoxious third cousin to call and ask for $1,000 loan, but just simply to say, I got a product, I’m going to send you three shirts. I’ve got this idea if you like it, wear it; if you really liked it, give one to each guy in the locker next to you.
David Rubenstein: All right. So, you have somebody who won the Heisman Trophy on your high school team, Eddie George. He was pretty good, I assume.
Kevin Plank: He could play.
David Rubenstein: Okay. Could you tackle him or did you ever tackle him?
Kevin Plank: I tackled him with help before.
David Rubenstein: Alright. Alright, so you were ready to get a division one football scholarship, but the division one was not ready to give you one?
Kevin Plank: Correct.
David Rubenstein: So you went to the University of Maryland, but you walked on the team?
Kevin Plank: I disagree with that assessment. But yeah, so we sort of march and cut our own course and I went on the team.
David Rubenstein: And you played all four years?
Kevin Plank: I did.
David Rubenstein: And so, how many people walk on and actually play all four years is that uncommon?
Kevin Plank: It’s probably unusual but I think they made a mistake. I think they should have the scholarship long before.
David Rubenstein: Okay. Well, I thought the same thing at Duke, I thought I should have gotten a football scholarship, but that didn’t work out. So, I should have walked on.
Kevin Plank: Now you can qualify with the gear that you have.
David Rubenstein: Okay. So, let’s talk about this. All right. So, while you’re there, you need to make or you want to make some money on the side. You set up a program, that seems pretty creative to me, to send out roses to people on Valentine’s Day. What was the essence of that business?
Kevin Plank: My freshman year, this guy I knew told me he was going to start a rose business and he asked me if I drive and I knew the area and I was local to Maryland. So, I went and drove for him and I realized his business was a disaster. I showed up, he didn’t get there till two o’clock in the afternoon.
It was a Friday. It was rush hour and I thought I could build this business much better than he did. So, my redshirt freshman year at the University of Maryland, I started a rose business. Sought out to sell a hundred dozen flowers, $25 each, plus a $5 delivery charge, $3,000 gross, the flowers cost about 15 cents a stem. So, it was a nice way to make $1000 or $1500. In my sophomore year, we sold 250 dozen, my junior year 600 dozen, my senior year 1186 flowers. And I remember that number because I was trying to sell 1500 dozen flowers and nothing like watching 314 dozen of opportunity die on you.
David Rubenstein: So why did you only do it one day a year? Did you think of other days you could have sold roses or other things or that was enough?
Kevin Plank: Well, I was an athlete so I had football to get into and so most kids were down at Mardi Gras and I actually stayed and worked that out.
David Rubenstein: So, you graduated. And when you graduated nobody, the NFL didn’t draft you, I assume, right?
Kevin Plank: No. I had to make other plans.
David Rubenstein: All right, they made a mistake, they didn’t draft you.
Kevin Plank: No, they were right.
David Rubenstein: So, what did you decide to do? You wanted to build a company, but where was the idea that came to your head about having a, let’s say, a t-shirt that would be better for football players? Where was the idea, the Genesis of that?
Kevin Plank: Probably the superpowers that I was looking for from gear. Is that as an athlete I never understood why would wear a short-sleeved cotton t-shirt in the summer, a long-sleeved cotton t-shirt in the winter. And the way that everyone had viewed apparel in the past had been as just another t-shirt versus viewing it as a piece of equipment. And so, a cotton t-shirt dry would weigh six ounces when it got wet it can weigh up to three pounds. So, as an athlete playing 70-80 plays in a game or God forbid going both ways, I thought there was this way to create a parallel to make it truly a piece of equipment that could help enhance your performance and make you better. And I sweat like a pig so I needed…
David Rubenstein: Okay. Alright. So how did you go about the idea of designing something or getting somebody to help you design something that would do what you want it to do? Where did you go?
Kevin Plank: The first place is, I went to a local fabric store and I brought in really a piece of, for lack of a better word, women’s lingerie. And I said do you make anything like this of this synthetic stretchy material because it was like the girdles that we wore on the lower half of our body. And I said, what if we made that for the upper body? And the woman at the store, at Minnesota Fabrics in College Park, she handed me a bolt of fabric and I bought what she had.
I then took this stretchy synthetic fabric to a local tailor in Beltsville, Maryland and I brought in a tight little white Hanes t-shirt, and I said, “Sir, can you make me as many t-shirts that look like this but out of this fabric?” And 7 prototypes later, I took them back to my teammates at Richmond on the spring in 96 and they tried them, they liked them and they worked.
David Rubenstein: So, they made the equipment for you, the t-shirts, how did you sell it? Where did you go to sell it?
Kevin Plank: I started with the guys and found out will this idea hold? And the players at Maryland said that they love them where could they get more. And I then knew I needed to learn how to manufacture. So, I read about this place called the Garment District in New York City. I got in my 92 Ford Explorer and drove up to 34th and Fifth Avenue, parked my car and found a place that could buy fabric, found a place that can manufacture and I made my first 500 shirts and then sent three t-shirts out to everybody that I knew and ever played with.
David Rubenstein: And your car was still there when you came back, right?
Kevin Plank: No, it was actually towed. It was expensive.
David Rubenstein: Okay. Alright, so you have the garment, it’s being manufactured and then your job is to go on the road and basically sell it to athletes, more or less, teams. So, was that hard?
Kevin Plank: I put 48 and 51,000 miles on my car in 97 and 98 respectively and then I started working my way up to airplane tickets and things like that to move around. But yeah, I’d do these great tours, but that’s a lot of miles.
David Rubenstein: Now, you are the youngest of five brothers. So, did your older brothers say you’re crazy and go get a job or what do they say about this?
Kevin Plank: Little bit of that, not really that nice. No, I mean I had a tremendous amount of support, my family was great. But everybody had their own thing and so I was doing my thing and Under Armour wasn’t obvious. People started and they call and they trip over the name as you know, what’s that thing you’re doing armor-all, underarms. They would mix it up.
David Rubenstein: By the way, where did the name come from?
Kevin Plank: It was intuitive until about seven years in. It was actually one of my brothers when I was going to actually name the company and call it, I wanted to call the company Body Armor and this is from, I’d been through, I wanted to call the company, Heart; I thought that’d be a great name. You know, you keep heart here. You were your heart on your sleeve. Like I thought it was a good name. I had a friend that worked at the Patent Trademark Office, guy named Patrick Kirsten and he ran all of my searches for me. This is before the internet and that name came back full and then I had to go to name the company, Body Armor. I was not good with a secret and I started telling people, I’m going to call the company Body Armor.
It was about two-weeks old between telling people or announcing the name and actually finding out if I could get it. And in that time, I came back and I found out there are two ballistic vest manufacturers called Body Armor. There’s a body shop in New Jersey called Body Armor, you’ll never get it through. And I went to go see my oldest brother and he was an architect and he was at his desk and he said, “You ready to go to lunch?”
He said, ‘Yeah. How’s that thing you’re working on?”
I said, “What’s that?”
He said, “What you call it? Under Armour.”
And I said, “Under Armour?”[clipped his finger]
I said, “I can’t do lunch. I got to go.”
I went home, filled out the paperwork, the 800 number and the website.
David: But they tell you that armor is spelled ARMOR.
Kevin Plank: Yes, but for an 800 number because I didn’t know if this internet thing was going to stick in 96. 8884ARMOUR or 8884ARMOR so I opted for the old English version.
David Rubenstein: All right, so you started, you got the name of the company. Where did you get the money initially from the rose business or do you get investors? Where’d you get your initial money?
Kevin Plank: Investors. Yeah. This is before private equity but I had $17,000 in startup capital that I used and then it was just friends and family and there were moments of selling a percent in the company or 5% of the company for five thousand dollars. It was whatever we could do just to get the company started. Just some way, somehow find a way.
David Rubenstein: So, when you’re starting this company, does Phil Knight of Nike call you up and say hey, by the way, it’s too competitive in this business. You shouldn’t get into this business or did he ever pay attention to you?
Kevin Plank: I don’t know.
David Rubenstein: He wasn’t paying attention to you.
Kevin Plank: You always have interest in so I thought about the number of times that we’ve talked about buying Acquisitions, things like that. And I’ve always had a very simple philosophy is that if anyone ever offered us an amount of money, I’m a fiduciary first and foremost, it’s my shareholders, if anyone ever offered me an amount of money greater than what I believed I could get the company to, it wouldn’t be my choice, it would be my obligation to make the right decision, but I have yet to see that happen so we go back to work every day.
David Rubenstein: All right. So, you’re growing the company, what other products did you line extensions, they would call them? What other products did you build?
Kevin Plank: We let the consumer lead us. We have a saying in Under Armour is that you know, we’ve yet to build our defining product as a brand. And so that’s something that challenges everyone in our product teams. Our marketing teams are making sure that they’re working toward the next great Innovation and it’s the consumer who tells us. Our first product began as a tight-fitting t-shirt for the summer and all of a sudden, it was can you make something for warm weather? Can you make long sleeves? Could you make shorts? And then you have this ethos or Essence that becomes the brand that needs to translate through every product that we build and it comes through the essence and that consistency that continuity, that’s what brand is. And so, whether it is a shirt or a short or a shoe, it must all feel Under Armour. That shoe should feel as great next to skin without a sock on it because it’s Under Armour and it should keep you cool and it should breathe and it should have balance in recovery and everything about it should be making you better.
David Rubenstein: Can an athletic shoe really make me run faster?
Kevin Plank: It’s all relative.
David Rubenstein: So okay, but I mean, I guess it makes a little difference, right, it only takes a little difference to make…?
Kevin Plank: Yes, especially when you get to that Elite level and the shoe you’re wearing. I mean it’s a connected shoe which is one of the first connected, or the only connected, running shoe ever built. Which means it has a chip in it that you don’t have to take your phone for a run to track where you’re going. And so that shoe actually has an app that comes with it, you download the app. You can leave your phone at home. You can walk outside, it could tell you your distance, your split, your cadence, and your gait. And so, the distance, as to how far and it can make recommendations, you could run faster if you shorten your gait, lengthen your gait and gives real-time coaching and it ties into our connected Fitness platform, which today has over 250 million people as a part of it.
David Rubenstein: Well, I’m sure I could run faster by 8 less or whatever else but probably that’s not the major factor.
Kevin Plank: It won’t critique you, it’ll just encourage you.
David Rubenstein: So, what about great athletes? Now, when you try to go sign up these athletes everybody knows since Michael Jordan, well, I guess Stan Smith had a famous tennis shoe that was made by Adidas.
Kevin Plank: Still does.
David Rubenstein: I guess it’s still out there. And then Michael Jordan shoe became famous. Everybody realized if you have an athlete endorsed a shoe, it can help sell the shoe. But to get these athletes to do this you have to basically pay them money, right? They don’t do it for free.
Kevin Plank: It’s nice when they start because they love the brand and because they love the product. And so, Jordan Spieth is a great example of an athlete who played football and baseball and basketball growing up and he loved Under Armour. And that’s why he wanted to sign with our brand. Stephen Curry was an athlete who came to us. He had already signed one NBA contract with Nike and then he made the decision to switch to Under Armour. There is a certain type of athlete that decides to be with Under Armour.
David Rubenstein: How did he decide to pick Under Armour over the others?
Kevin Plank: Truth be told, it was actually his three-year-old daughter, Riley, at the time who made the decision. So, this is actually a pretty cool story. So, Stephen when making the decision he had offers from all three brands and Stephen was, you know, the seventh pick in the draft and his three years had gone by and he didn’t feel he was getting the love really from the brand he was with at the time. So, to make the decision he put all three shoeboxes with a shoe on top, each shoe that we had projected for him and he said, “You know, Riley I need to help make this choice, tell me what you think.” Maybe she was one or two, actually, and she got up and sort of hobbled over there and she picked up the first shoe which is the Adidas shoe, she picked it up, looked at it, threw it over her shoulder. She sort of waddled over to the second Nike shoe and picked it up and threw it over her shoulder. Then she picked up the Under Armour shoe and walked over and said, “This one daddy.”
David Rubenstein: Wow. And you have to pay her to or?
Kevin Plank: I mean, we might; it’s not a bad idea. I wish it was that easy today.
David Rubenstein: So, the athlete has to like the product but obviously, they liked to be compensated for it. But in the end, you know, when children or young adults are buying athletic equipment or apparel, they might be induced to do so by Michael Jordan endorsing it. But for somebody my age or older people, are they really going to be induced to buy something because Michael Jordan endorses it or really it does work with people like me.
Kevin Plank: Are we targeting you? Our mission statement says to make athletes better and our ambition for doing that is when you can outfit the best and people that really care about every ounce, every nuance of a product that comes in. I think that trust is something that builds credibility that allows the inspiration because do you care or not, but it’s nice to know that the very best this is what they choose to wear when they’re performing at the highest level.
David Rubenstein: Now the products, where are the products made? There’s a perception that all these athletic products or apparel are made, let’s say, in Asia. They’re all made at the same kind of places and these people are paid very low wages. And in the end, the same factory makes things for you, Nike, and Adidas; is that true or not?
Kevin Plank: I think that the global manufacturing process is something that is, it’s critical to I think growing and creating, you know, second world and first-world economies. You watch what’s happened in China of the elevation of the minimum wage. When I made my first trip to China in 1999, Guangzhou was a hot manufacturing bed. Today, Guangzhou is the number three tier-one city in all of China and it’s been that transition that it got there through manufacturing. So, I think it’s something, it’s all relative. But this is something we take great pains that we do when we’re evaluating making sure that the shops are meeting the standards and deliver things the way that we want them to be delivered.
David Rubenstein: But sometimes your products are made in the United States, or not?
Kevin Plank: Of course, it’s a very small percentage today, we gave up on that a long time ago.
David Rubenstein: So, let’s talk about Baltimore. You’re from the Washington suburbs Kensington, initially, and you went to the University of Maryland, which is in College Park, more or less a suburb of Washington. Why did you decide to locate the headquarters of your company in Baltimore, which is my hometown, it’s a great city, but wasn’t a natural place for you to locate a headquarters or was it?
Kevin Plank: I think two things. Number one, there was something about the grid of the city that was appealing to me. I moved there in August of 1998, made the decision to move from Georgetown with my partner, Kip Faulks. And when we moved, it felt like it was sort of fresh breath. It felt like, it was the grid of Baltimore was sort of this lunch pail, work boot, chip on your shoulder and that’s really what I wanted the brand to be. So, there’s a reflection there.
The second thing was being the youngest of five boys, growing up here, I had a lot of history in this town. It was nice just to get a fresh start and Baltimore is a place that is close enough to Mom but far enough away to really start with a clean sheet of paper.
David Rubenstein: So, no skeletons in your closet in Baltimore, right?
Kevin Plank: No, it was starting over and starting fresh and building something great.
David Rubenstein: So today how many employees do you have in around the world?
Kevin Plank: A little more than 14,000 people.
David Rubenstein: 14,000. How many are in the Baltimore area?
Kevin Plank: So, when Kip and I moved, it was Kip and I and we went there with two employees. And then today, there’s probably 3500 -4000 between corporate and one of the main warehouses that we have there as well, called the distribution house.
David Rubenstein: You’ve been very involved in philanthropy in many different areas. One is in Baltimore and now you outfit, at your own cost, the athletes of all the Baltimore City Public Schools. Is that right more or less?
Kevin Plank: You know, what I think is the unique thing about Under Armour is that we have the ability to connect with kids in a way that other brands don’t. And so, you know a bank or an insurance company, it’s nice but kids want to be around our brand and we have the ability to take advantage of that. And so, the things that we do to activate it, you know, we have things that every one of our teammates, as we call them, contributes 32 hours a year and we have something we call armor days which we did one this year. We put 12,000 hours of man and woman power together to actually transform three middle schools in Baltimore City.
We’ve built a Rec Center, called UA House on Fayette Street. Outfitting all of the high schools is critical and then for me, personally, the ability to touch up to 500 kids through summer programming, tuition assistance, education in college and other things. As well as, there’s somebody who named Joe Jones from the Center for Urban families that works with formerly, incarcerated individuals that get brought out, to the ability to actually affect both lives before and lives that need another opportunity are some of the things I think that we’re taking on and really trying to make a difference of in Baltimore City.
David Rubenstein: All right, so you start your company in 1997, is that right?
Kevin Plank: 6.
David Rubenstein: 1996 and you took the company public in 2005. At the IPO, when you price an IPO, the theory is you want the investors to make some money. So, they buy it at a price A and it goes up by 10 or 15%.
Kevin Plank: Yeah.
David Rubenstein: So, they feel good that the first day they are up 10 or 15 percent. So, the underwriter’s job is to price it so it goes up a little bit.
Kevin Plank: Yeah.
David Rubenstein: Your Underwriters priced it in a way where your stock went up on the first day 100%. So, did you leave a lot of money on the table or what?
Kevin Plank: Potentially, but what the bankers will tell you is that going public and what I’ll tell other entrepreneurs going public, it is the starting line. But I’ll tell you, leaving that much money on the table certainly wasn’t ideal and it was an email that I got from a certain private Equity is somebody that you know, well, I don’t know if I’ll use their name, but he sent me an e-mail because we had this great meeting where he said, “Oh my gosh, I love the company.” On the IPO is our second or third or last meeting after 77 one hour one-on-one meetings on the roadshow.
I said I really like this guy. I told the bankers, I said, “They need a bigger allocation. Give them a bigger allocation.”
He said, “Oh, it’s a smaller fund. You shouldn’t give them a big allocation.”
I said, “No. I’m mandating you do it.”
At this point, they’re saying, “Okay, fine. We’ll give them a big allocation.”
I then get an email two days after the IPO, it just said, “You know, dear Kevin, loved meeting you, thanks so much. Congratulations on your brand. Unfortunately, you blew through all of our investment parameters, so I had to sell everything.” And he doubled his price basically and sold out of the stock the next day, which was a great lesson of sort of going public is that a trade is a trade. So, the market, it doesn’t see that potential. It sees, ‘here’s my investment parameters. And here’s your PE and here’s how we’re going to do it.’
David Rubenstein: In other words, he didn’t love you. He just wanted to get a little money?
Kevin Plank: Well, he did what hedge funds did is he made money.
David Rubenstein: Alright. So, the first day the stock goes up a hundred percent. That, I guess, makes you feel good. On the other hand, you left a lot of money on the table, but your company is in good shape. And then, I think it’s roughly 26 consecutive quarters, your revenue went up twenty percent a quarter. So that’s very unusual to keep going up that way. At what point did you realize you just couldn’t keep doing that?
Kevin Plank: You know, we had a great run from 2010 through 2016, roughly, you know with that kind of growth was something that we’ve never really been seen in consumer retail before. We achieved crossing 500 million or a billion faster than any other brands had done in our space. And in our industry, there are only two now, three or four companies that have crossed the five-billion-dollar threshold. And when the other companies didn’t, they didn’t have a 25 or 35-billion-dollar Juggernaut sort of above them. That run was one where I think we had a lot of ideas of how large we could be and doing that, it never took away from how great that we knew the company could be either. And that’s always a focus, you want to build a great brand.
But in doing it, when you have that opportunity is grabbing, the era for us is called Get Big Fast and Get Big Fast was in 2013 and we were 2.3-billion-dollar company and we effectively from 13 to 16, we went from 2.3 to 4.8 billion dollars. We more than double the size of our company in less than three years and that puts all kinds of strain because this isn’t software that just leverages out the backside. This is infrastructure and facilities and boxes and buildings and a lot of things and I think we made a great run and I think we allowed to put ourselves in a position of scale that’s allowed us to really live through the last two years in a place that’s stronger than we could have ever been, had we not grown at that rate.
David Rubenstein: Your company was growing quite nicely. The stock price was going up. In fact, today your market value is about nine and a half-billion dollars, more or less, but it was almost double that at one point.
Kevin Plank: Yeah.
David Rubenstein: So, when it started going this way, did you think you had to reinvent your company or what did you decide to do?
Kevin Plank: I think every company, every great company, every great brand will come to a crossroads where they have to decide, how are you going to attack it? And I believe that that’s something that we’ve taken on, would call it a transformation. And as we’ve said publicly is that we’re roughly two years through, we’ll call it a three-year transformation, and that meant a lot of restructuring charges a lot of reorganizations. We had to, unfortunately, do some riffs in our company and in going through all that process, it’s made us a better and stronger company. And I think about the three things that we’ve leaned on which has been, people, process and product.
And people, it begins with my new partner, I brought in a new COO and president named Patrick Frisk. He’s coming up on 18 months and has been excellent helping us transform, implement a go-to-market process, deliver a new operating model, really just getting our structure and getting, I think, our costs in line so that we can be as excellent and profit on the bottom line as we’ve been able to demonstrate we can do for growth in the top line.
And then, process, he has been implementing new systems, getting our people aligned to that and then, whoever makes the best product is going to win. And so that’s one thing we know that regardless of everything else, if we make a great product like we recently did with this footwear called Hover that we’ve launched into the world, the consumer is going to choose it and will be there and we have a real chance.
David Rubenstein: So, you are not in the athletic equipment business, unlike some of your competitors. Like I think, let’s say, Nike, they make some athletic equipment. Why are you not in that business? You’re in the apparel business.
Kevin Plank: Equipment is a tough business and there are lower margins. It’s not as compelling or attractive and I think that we’ve effectively believe that we bring equipment. Our footwear is not just another shoe. It’s a shoe that comes with an app. It’s a shoe that actually will help coach you to make you better. Our apparel isn’t just apparel that wears because it’s stylish or cool. It should be stylish or cool but what makes it great, that jacket you’re wearing is lined with Saline, which actually helps increase your blood flow and helps your muscles recover faster to put you in better shape for tomorrow.
David: Okay. All right. I’m feeling the blood flowing already. So now, a number of years ago when our competitors, Nike, they began to have their own stores, Nike stores. Now, you have your own stores, right?
Kevin Plank: Yeah.
David Rubenstein: So, you have a number in the Washington area and I guess around the country. So, do you sell more products there than you do with the regular retailers who sell your products through?
Kevin Plank: It’s a combination. In the United States, we have a really good wholesale system. So, partners like Dick’s Sporting Goods or Hibbett Sports or Foot Locker and Finish Line, people like that and around the world, you don’t have that. And so, you go to different markets in China, there is no Sporting Goods Channel. There is no way to get your product out there. So, this past spring, we opened store number 1000 around the world, actually in Mexico City. By the end of next year, we’ll open another two to three hundred stores in 2019, moving forward. The majority of which will be in China, but we have that balance and the ability frankly to control your destiny because dealing through a wholesaler is difficult unless you really have the ability to articulate clearly how you want to show up and how you want to present the brand. So, we have the ability to do that in our own stores.
David Rubenstein: Now in China, very often, when I’m there, I sometimes see knockoffs of American goods and so forth; are there knockoffs there that you have to worry about or is that not a problem there?
Kevin Plank: We’ve had several lawsuits. I don’t know if I’m the lawyer like but you’re striving for that moment where people want to knock you off. And then all you want to do is protect yourself, obviously, when you can but we’ve had some crazy lawsuits that have gone back and forth and they’ve resolved. The Chinese courts have been great to us too.
David Rubenstein: So let’s talk about for a moment how your culture of your company, you were in the news recently for the nature of your inclusion and not including certain people in your company. Can you address the culture issue?
Kevin Plank: So, the hard thing with building a business is that the first thing that I want to do is I wanted to build a house. I wanted to build a great house. And as you grow, you realize that the house has become a building and it’s gotten to a tall building. And the first thing is that for any entrepreneur is that as the CEO, I am fully responsible for everything that happens in my company, but what I’m required to do and where I’m accountable for is the actions we take when bad things happen. And I think we’ve been incredibly proactive when it comes to issues that arise and this is something that’s going to happen in any organization the size of 14,000 plus. And so, we’ll continue to make that, we’ll continue to be proactive and we’ll continue to invest in our culture to make sure it is inclusive, it is diverse. It is something that is, it is an equal opportunity for anyone who wants to join our brand and we encourage that. And again, that’s not just simply a statement; it’s a statement because it’s the best thing for our business.
David Rubenstein: And diversity in your materials, you indicate I think in materials, I read that roughly, almost 40, almost 50 percent of your workforce is diverse in one way is that accurate?
Kevin Plank: Yes.
David Rubenstein: And you go out of your way to look for a diverse employee base?
Kevin Plank: Yeah, of course, I mean when you look at the S&P 500, I believe there’s a systematic, there’s a global inequity that prevalent right now. And I think you’re seeing a lot of this come up and I think there’s a massive opportunity for organizations to use this moment of time to really enhance and again, this isn’t a requirement. This isn’t to be legislated. This is something that can actually I think, be a generator for us. We have a 1.2-billion-dollar woman’s business, I don’t feel like we get anywhere near enough credit for it. And I do believe if we had larger numbers as we continue to increase the number of diversity or especially women in leadership, I think you’ll watch that number double and triple in years to come.
David Rubenstein: So, talk about the athletes; when you sign up an athlete, is it a very arduous process? Let’s suppose you want to get new basketball player that’s coming out of college and he’s, let’s say, a superstar, you and two others or three others are trying to get him, how do you do that? You have to go meet with them. You have to tell them how much money you’re going to pay and you have to show them the equipment. How long does that process take?
Kevin Plank: It’s you have to work, I mean, to have the best. But athletes are different today and again trying to relate with a 20 something-year-old, you want to make sure that you’re speaking to them because today’s athlete is incredibly sophisticated as well as, they understand they are a brand. They understand what they’re bringing to the table and they have a really good understanding of what their market value is and they’ll test that. But the way to win these athletes it’s not always through the front door. If you’re showing up at, you know, it’s sun-soo, the victorious army attacks the defeated enemy; if you’re waiting at the negotiation table for that to be done, you’re going to lose. When we sign Stephen Curry, for instance, it wasn’t waiting to be one of those three shoes with Riley. There’s a guy named Ken Bazemore who was an unsigned free agent who happened to just have his locker right next to Stephen. So, we signed Ken Bazemore and then we loaded Ken with products like on a daily basis and it was this thing where his job was to help us sign Stephen. And then eventually Stephen just said, “Man, if they take care of you this well, imagine what they’re going to do for me.” And he like helped him with the understanding and that was you know, you have to play chess with these things and certainly not checkers.
David Rubenstein: Are you looking at the high school and college athletes all the time and see who’s the best one, the best personality and so forth? Are you scouting these kinds of people and getting them prime for your approach?
Kevin Plank: We’re always looking to find who is next, I think we’ve been incredibly proud of that. In 2015, we had all four major US sports leagues, MVPs, plus the number one golfer and the number one tennis player in the world. That’s the kind of thing where you look at a year like that and saying can you replicate that? Remember, we’re big enough as a company now that we can do anything. We’re just not big enough that we can do everything. And so, we have to be thoughtful, we have to be strategic, we have to take sniper shots. And our competitors have much greater resources than we do but that is not an excuse and it’s why we still compete and why we believe that we’re going to be number one.
David Rubenstein: One of your products is new, it’s pajamas. Now, is that an athletic kind of thing or what is that?
Kevin Plank: So, it actually it’s what led to the top that you’re wearing now is what makes Under Armour unique is, of course, the styling, the fit, and moisture management, all those things that people have always taken for granted about our brand. But the consumer actually wants or deserves more and so Tom Brady actually brought to us this idea of this selling it lining. Where because the way that he’s played well into his 40s is because he actually, when he recovers and I’ve seen bruised knees, elbows, he uses this wrap and he believed in – and you’ve seen things from those copper bands and other things out there, but this is the first. It’s actually FDA proven that it increases blood flow, which helps increase the speed at which you can recover, have your muscles back faster. So, when you’re playing from one day to the next you can actually come back that much better.
And he asked if we could do a pajama line and we introduce that and it was something where people actively recovering at night, we said while they’re just actively recovering at night, what if we actually put it into their activewear too? So, one of the things we’ll be launching in the spring of 19, is something called Rush and something called Recover, which actually includes this recovery material into what you do. But you should have that sort of science project with everything…
David Rubenstein: You’re married to Giselle, you might need recovery, right?
Kevin Plank: I’m not going there.
David Rubenstein: Okay. So, you’re very well known for having a white chalkboard in your office and you write sayings there. Is that a way that you teach people, where you encourage people or motivate people, what is the theory behind that?
Kevin Plank: I’ve kept it since I started and as an athlete, this is where coaches would keep everything from depth charge to slogans or sayings. And for me, it’s a place where we’ve always captured the real spirit and essence of the brand. And say things like, ‘over promise and deliver, dictate the tempo.’ It says things like, ‘trust, it’s built and drops and it’s lost in buckets.’ It has sort of the things that make and really require the DNA of what is Under Armour.
David Rubenstein: Okay. So today you’ve built a great company and you’ve made a great deal of money by any normal human standards. So, what do you do with rest and relaxation when you’re not working? Right now, you have money, you can travel anywhere, you can buy anything. What are the outside pleasures that you really enjoy other than interviews like this?
Kevin Plank: Yeah. I love driving home, parking my car, walking next door to where my kids go to school and watching my daughter play field hockey or watch my son play football or play hockey. You know, I think I’ve got a terrific family and I’m very fortunate for that. And to have, I think, the ability now where you get to watch it sort of play out through the eyes of kids and you know, it’s not easy being our kids is because of course, my kids are required to only wear Under Armour all the time.
David Rubenstein: Suppose they wear Nike thing, what would happen?
Kevin Plank: That’d be bad. But they wouldn’t do that.
David Rubenstein: But they wouldn’t perform as well either.
Kevin Plank: I mean, I’ve been running their little legs telling them like don’t ever wear them. I want them to love the brand, it’s important.
David Rubenstein: So, do you have any interest in owning a sports team? You’re obviously involved with a lot of sports teams but would you like to own one team itself or not?
Kevin Plank: I think one of the best things about my job is that Under Armour is undefeated. You know, we go to a game and watch two teams play and you know it’s nothing like watching – I was at the Northwestern Wisconsin game and you walk in one room and its alternate empathy and I’m sorry and you walk into another room and its high fives and so that balance is something which is a lot better than living with the highs or lows, I think of a team. So, there are 30 good owners and so the sports leagues, I think they’re okay.
David Rubenstein: You’re very, very young to be in this position. You’re 46 years old so you could do this for another 30 plus years if you wanted but would you have any interest in going into something more important, private equity or would you like to run for office ever or go into an appointed position in government or this is what you want to do?
Kevin Plank: What I love is there’s an old story that I’ve told before which is; there’s nothing like this one time, I was in a sporting goods store out in Washington and I’m sitting there and it’s four o’clock in the afternoon. I’m watching this mom walk in with two little kids, maybe eight and 10 years old. She’s got them both in the hands and all of a sudden, the little eight-year-old just goes, “Mom, mom, look, Under Armour, Under Armour.” And she starts pointing and pushing and the mom is like, “Don’t go over there, the stuff’s expensive. Don’t buy that.” And the kids from watching them like, go, getaway. The kid breaks away and he runs over he grabs an Under Armour shirt and he pulls it over his head and he’s still wearing his school shirt and he pulls it down over the side, sticks his arm out and his mom’s distracted with the other one. She’s trying something on with the other boy. And I watched this little kid and his neck’s all jammed up under his collar and he just walks over. He just goes, he stands the middle of the aisle, he goes, “Hey Mom, look at me. I’m wearing Under Armour. I can do anything.”
And I’m sitting there and I’m watching this happen and I just think to myself, “That’s brand.” You know, the brand is that little boy or that little girl that puts our gear on believes that they can be a little more; they can run a little faster, jump a little higher. It may be the belief that they can make Varsity and maybe the belief that they were anxious at the cafeteria and they were careful of where they’re going to sit down. But today they’re wearing Under Armour and they had that superpower. So hopefully, if I think about what I’d love to do is, I love being able to hopefully be able to gift that superpower to anybody in the world that gets engaged in our brand.
David Rubenstein: When you were an athlete you were not a superstar athlete, but now the people who are on your team, who were better athletes, they come to you for jobs or?
Kevin Plank: That happens sometimes. But no, if we’re in the position – sports is, I think, one of the most important training grounds, I know that I wouldn’t be doing Under Armour had it not been for having played a sport and been in football and for the obvious reasons, but also for more is that you learn team, you learn to understand. I think football is a game that has great pressure on it right now, but the lessons learned, an America without football would concern me a lot more than America with football.
David Rubenstein: So, the final question I’d like to ask is that suppose I’m going to an athletic store to buy apparel and I have Adidas, I see Nike and I see Under Armour; why should I or anybody watching buy Under Armour? Is it better? Is it less expensive? Is it going to make you a better athlete? What’s your presentation about why your equipment or apparel is better than your competitors?
Kevin Plank: So, number one, I could march a dozen scientists in here and tell you why we’ve had 16 PhDs work on developing the fiber fabric or construction of that product and the hundreds of hours of wear test that we pour into everything that we do, the amount of focus that we have in making sure that every product is truly an advantage that’s making someone better. And I want that to be trusted. I want that to be known but at the end of the day, I want the consumer to know that this is a brand with a soul. I want them to know that this is a brand that is focused on Innovation. That if it’s Under Armour, it’s got to be something they can be better. That if I see you have an Under Armour logo, the first question I should ask is that Under Armour? What does it do?
And the third thing is, I’m really proud of our story and I want people to be able to embrace and feel that too when they engage with our brand that they feel like they’re a part of this. I think one example of one of the amazing American source.
David Rubenstein: Well, it’s a great story. And I wonder if you ever thought of signing up private Equity people as endorsers because you know, I mean we’re athletes too and we can endorse, there might be people who might follow my endorsement. So, you might think about that.
Kevin Plank: That’s a small market with a big opportunity for a high average order value though so we would…
David Rubenstein: So, thank you very much.
Kevin Plank: Thank you very much, appreciate it.
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