Rundown: Under Armour attempts another turnaround, Shein's attempted NRF membership & Costco partners with Uber Eats

0:06Hey, everyone. Welcome back to the Modern Retail Rundown, our weekly news recap show. This is senior reporter Gabby Barco here with editor-in-chief Kale Guthrie-Weissman. Hey, Kale. How are you today? Hey, Gabby. I'm doing okay. How are you doing? I'm doing really well. I'm so excited to talk about Costco. I don't know about you. I can't wait. Are you a Costco member? I'm not personally because, you know, in the city, it's kind of like not that useful, but maybe I will be soon. I don't know. Now that we have delivery. Via the app. Yeah. I've always been thought about doing it, but I don't buy things in bulk, which I think means that I'm uneconomical, but maybe I should start doing it.

0:48Yeah. Well, that's the other thing. We don't have this space. Yeah, exactly. We live in New York. Where am I going to fill that toilet paper? Yeah. I don't have a place for toilet paper. I don't have a place for 10 pounds of rice. I don't need any gold bars. I don't know. But I do like hot dogs, so maybe that'll do it. I don't know. I know. Well, we'll get into the gold bars later, but on today's show, we're going to talk about Under Armour's latest turnaround plan. It's, you know, one that they've been kind of trying to execute for a while and it's constantly changing. So we'll give you an update on that.

1:22And another headline this week was Shein has been apparently trying to get into the NRF, the National Retail Federation. It's sort of like an industry group that I'm sure a lot of people know. And it's not super important, but I mean, it's more symbolic. And we'll talk about why that's important for Shein right now. And we will wrap up by talking about Costco on Uber Eats. This is the latest. It seems like Uber has struck a partnership with everybody under the sun at this point. So it makes sense that eventually Costco will get on there. But yeah, first off, let's talk about Under Armour. We were just saying how this is such a long and just unwinding story that I think one of my first days at Modern Retail, I was assigned an Under Armour story and I was very lost to say the least.

2:21Yeah, to tell the story of Under Armour is one of synthesis because I spent all morning trying, you know, and I've covered Under Armour. I've been abreast of everything that's going on, but it still is difficult to do an exact like TikTok of like, what went wrong? And what are they doing now? And so this was a fun hour this morning, just trying to get things together and create a solid version of where it is now and why it got here. But yeah, so. Yeah, so we can start out by talking about This is the athletic apparel brand. They unveiled their most recent earnings, and sales, unsurprisingly, continue to drop.

3:06This time, it was a 5 % drop year over year, so it hit$1.33 billion, which still seems like a lot of money, but I guess we'll talk about why it's not that great, because the net income also dropped. So yeah, what do you make of these numbers? Yeah. Yeah. So, you know, analysts have been expecting these sales to drop. So, and honestly, actually, analysts were not totally angry at these results. I think the stock went up like 1.2 % or something like that. But as you said, revenue dropped about 5%, hitting 1.33 billion. The net income, so the profitability dropped to 6.6 million compared to 170.6 million a year earlier.

3:53So its profitability is really being squeezed. And I'm sure investors are not too thrilled about that. Under Armour also is now forecasting a drop in North American sales. North American is one of its most important regions. It says for this year, it could go down between 15 % and 17%. So that's not good. And so we'll go into the shakeups in leadership in a few minutes. But Kevin Plank was Under Armour's founder. He stepped down into 2019. He's now back. That's the big news. He's back and he has another turnaround plan. It's different from all the past turnaround plans. This time it's going to work, they say.

4:33But here's a quote from when he was talking with analysts earlier this week. This is not where I envisioned Under Armour playing at this point in our journey. That said, we'll use this turbulence to reconstitute our brand. And so if you've been following the company, this sounds similar to things that we have heard in years past, but this time he's serious, I guess. I don't know. Yeah. And, you know, we keep mentioning this, but this has been a drawn out story for Under Armour. It's also really interesting that it comes at a time when, you know, athleisure and athletic wear is really at an all time high.

5:11So it really does come down to assortment and branding and all of that. And they just can't seem to hack it. So essentially the brand, which was everybody who grew up in the early aughts remembers those really tight tops that everybody would wear under their uniforms. So they were doing really well until, I guess, you know, about a decade ago. So when athleisure began to rise, this is around 2017 and a lot of other companies adapted to that. Under Armour essentially saw this like lot of inventory. So they just did not know what to do with a lot of the products that were just, I would say, no longer really relevant.

5:50I'm not sure. I mean, I think that's just obviously an opinion, but it's also reflective in the sales. So yeah, what did they do since then? I think that like the 2017 to 2020 era was supposed to be the first, you know, turnaround phase. And then of course, COVID starts. So that kind of threw a wrench in that. Yeah, there were a few things. A lot of it was just they would change leaders and the leader would give a lot of platitudes about how they're going to, you know, grow the business and never really explain what it does. A lot of it was focusing on either expanding into new segments or growing sales in a new channel.

6:29Under Armour for years always talked about how it needed to grow its DTC channel because it was too reliant on wholesale. The company has seesawed on this for many years. But I was doing a bunch of research, and I found a 2018 press release. And I was trying to be like, what was the original turnaround plan for Under Armour when all this happened? And here's what they said at the time. The focus was, quote, an accelerated innovation agenda driving even deeper connections through return-driven demand creation and brand experiences and utilizing an optimized supply chain model along with improving service levels to keep pace with a dynamically evolving market.

7:12So I don't know what the hell that means. It's all the buzzwords. They were turned into a blender. Yeah, but pretty much it was my – for over the years, Under Armour realized that it was falling out of favor. An interesting thing that has happened is that it had a bunch of major sports partnerships. And some of them, you know, a lot of them, there were complaints, I believe, with Olympic athletes that they weren't performing well or made them slower, things like that. So they lost Olympic partnerships over the years to be the provider, or not Olympic, but for major sports partnerships. And they lost those partnerships over the years, which I think also hurt Under Armour's credibility.

7:50And then this led to major inventory glut, as you mentioned. The pandemic only exacerbated that. And then it was just a question of what should the company be investing in? And then another big problem that now the company is really harping on and trying to fix is that because they had so much inventory, that meant it had to discount. And so promotions were a big thing for Under Armour for years, which also really hurt profitability. And so, but then, you know, one of the big issues that people are pointing to now is the fact that it has just had an insane turnover of executives. And so just to give sort of a truncated history, there are people underneath the CEO, but Kevin Plank, founder, when all of this started to hit the fan in 2017, in 2019, he stepped down as CEO, was replaced by COO Patrick Frisk.

8:42for less than he was there for less than two years, Frisk was. And then he stepped down and they brought in a Marriott exec, this woman, Stephanie Lenartz. She was known for really growing the Marriott Bonvoy program, and she was going to fix everything. And that lasted, you know, less than two years as well. She stepped down early this year and Plank is brought in again. And then, you know, I was going through what were some of the focuses. As I mentioned, DTC was a big focus with Under Armour. Something that Under Armour said last year, I think in August of 2023, was that it was going to focus on growing its women's business because it was too focused on the men's business.

9:22Women's represented less than 25 % of its revenue, and so it needed to go there. But now things are changing, and the company is saying, we need to go back to basics. Hmm. Yeah. So what is this new what is this latest plan? So Plank essentially said that they're going to be focusing on fixing some past strategic errors. So CNBC reported that he told analysts the company had taken our eyes off its core men's apparel business, which is significantly significantly impacted the brand's perception and led to more promotions. But I feel like that kind of is just contradicting literally what we just said about expanding into women.

10:12So there's this like seesawing that's happening. Yeah, I think he also pretty much said there have been a lot of new leaders here and it led to major strategic errors. And so pretty much he's stepping in being like everyone over the last four years has messed up. So I'm going to fix it. People said they were going to focus on women's. We're not going to focus on women's. we're going to focus on our core, which is men's athletic wear. And it's definitely a bold and specific statement. I'm sure analysts are happy that it's very to the point. And it's also very focused on profitability. He said that Under Armour is going to reduce the style count by 25 % and also really speed up production times over the next 12 to 18 months.

10:55And so a lot of it is focused on going back to basics. I should also add that a lot there have been over the years, but also recently many layoffs at Under Armour. And so the company is really trying to figure out a way to grow profitably because it hasn't been growing. Revenue has fallen and its profits have completely shrunk. Yeah. So like we said, you know, I think there's been a lot of attempted changes over the last few years. And this one, you know, I think, you know, whenever the founder is back and trying to save the company that he founded, I'm sure that will have a lot to do with reining a lot of the spend in.

11:36But it's, I mean, the analysts seem receptive. Like they seem excited. Like you said, the stock is up. But it is a little hard because we've heard a lot of, I mean, we've heard about turnaround plans from Under Armour in particular a lot over the last few years. And then the companies that they've hinted at, I mean, who do you think about when you think about, yeah, this sort of like this new emerging brands that have come in and made it even harder because it's no longer just Nike and Adidas. Yep, exactly. And so it definitely has a difficult mountain to climb and it's going against a lot of new brands, a lot of old brands.

12:19It has to kind of regain trust and it has to, I feel like Under Under Armour sort of lost what its competitive edge was, and it lost its perception as a premium brand. Because I think that's what's important for this type of retail. It needs to be premium. They've been doing a lot of promotions. They've been discounting. They've had too much stuff. And so it's going to be an uphill battle. And just looking at the stock price to really put a cherry on top of the premium. In 2015, Under Armour stock was$52. Today, I checked, it's around$6.70. sense. So it's got a long ways to go to get back to the$50 range.

12:59Now we will get to a company where revenue is not a problem. That's not really where their issue is. So Shein, which is obviously one of the most popular brands in the world at the moment, this was an interesting report that came out of CNBC this week. But essentially, they keep applying to be a member of the NRF, But it keeps getting rejected. And there's very much like a he said, she said situation. I was trying to read through it. And it seems like the NRF is like, no, no, you know, that's not really what's happening. We just kind of, you know, we have to meet and talk about new members. But some of the people that talk to CNBC are saying that there's, of course, we're going to get into the controversy around Shein and why bringing it in as a member would essentially legitimize it.

13:48And we all know how, you know, American retailers feel about Shein right now. Yeah, exactly. This isn't surprising, but Shein is often the butt of many retailers and brands' jokes and also spoken very candidly in earning statements as we're fighting off competitors like them. And so to see this type of example in the news isn't surprising, but is definitely interesting. So, yeah. Yeah. One thing I thought was interesting, if you look at the application for NRF, it seems pretty simple. And from what I've read about, it's not that hard to just apply and get in. I think you just kind of pay the fees and the dues.

14:36And as long as you're involved in the retail industry, to some extent, they do bring you in. And there are some benefits, like you get to participate in a lot of the industry events and help vote on some decisions. And I mean, it's a lobbying organization. So of course, there's a lot of politics involved, which we will get into because I think that's really the crux of the problem when you really read between the lines. And like the CNBC story found an application, although NRF says the application that CNBC found is outdated. So maybe it's completely changed. But it says pretty much the major thing is companies principally engaged in retailing are eligible for membership in the Federation.

15:24So pretty much if you're a retailer, you can join. But I guess that allegedly that wasn't enough for Shein. So, yeah. And then, of course, this is all coming as the company is preparing for one of the biggest IPOs of the year, if not the decade right now, because, you know, they're very far and few in between right now. But yeah, they filed it last year. They are valued. Last I saw was$66 billion. So by all accounts, they're doing well. But of course, I think what they really have is the image problem, right? But that's been kind of something that they've been trying to work on for a few years now.

16:08But there just seems to be resistance still, at least among the industry. Yeah. And there's also there's even resistance with the IPO. I think there was a Financial Times story. I think it was like earlier this week, pretty much saying that Shein's attempted IPO, which began last year, has stalled. And so now it's switching to going public in London. You know, all of this is, you know, it's difficult to know what exactly is true or like, you know, what will happen in the end. But it seems like the company trying to make inroads, you know, in legitimate organizations like, you know, United States stock market, the NRF keeps coming up with major hurdles.

16:49So it's interesting to see that. And I think, you know, all of this is a major, it's, you know, it's a business front for Xi 'an, but it's also a major PR front to show that it is a company that is doing business in the United States or, you know, in the Western world. And it is real and authentic and not just some mysterious being from China that is selling cheap clothes and doing damage to businesses here. And so it's all a major PR front, but it keeps coming up with these insane hurdles and having to switch tracks. Yeah, I mean, one of the biggest issues is that it does have ties to China. And as we've talked about very recently, this is like sort of like Beijing and D.C.

17:39are very much at odds right now. And it seems like the tech and retail companies are kind of in the middle of that, you know, proxy or something. But this is it's also interesting that the London decision, because obviously being listed on an American exchange is really what a lot of the, you know, this resistance is about. And, you know, they just they would they feel like this would essentially be a seal of approval for Shein as a company that has, you know, gone through loopholes to be able to ship products really quickly to customers here in the U.S. I guess what I think is interesting is that Shein just continues to be so popular among American consumers.

18:25And the more popular it gets, the more it seems to be, yeah, I guess sort of maligned by the industry itself. Yeah. And it's become, I mean, this isn't to say some of it isn't warranted, but Shein specifically has become a huge retail scapegoat for like why a lot of businesses are underperforming where they will say, well, there's this competition that's acting unfairly and making, you know, cheap clothes and doing this and they're from overseas. And there are a lot of very valid criticisms about Xi 'an, you know, looking at its supply chain, where it's sourcing from, how it does things. But it has become this very polarized topic, similar to the way that, like, I would say, like, legislators are talking about TikTok, where, you know, it is meant to represent something greater than another business trying to do business.

19:24in the United States. And so it's interesting to see these moves where it's specifically like, no, you can't join this federation, even though you're like the number one shopping app on the app store, that type of stuff. But, you know, this is all part of, as you said, Sheehan's charm offensive to try and get people to warm up to it. And maybe things will change and it'll work. I don't know. Yeah. I mean, it's just such a big behemoth. Like speaking of NRF, I remember we were at the show in January and it seemed like every other session I went to mentioned Shein. So this is not, you know, any big secret that they're keeping.

20:04But yeah, it'll, I mean, I guess we'll see whether this, these reports are gonna make any changes in NRF's decision for approval. Yeah, it'll be interesting to watch. And yeah, maybe I feel like the NRF is probably unhappy that CNBC is looking into its application process, which, you know, so maybe something will change and Shein will be the latest member, who knows. But yeah, well, it was board members that spoke on background. So, you know, some leaks happening. Okay, well, next up, we are going to be talking about how very soon you will be able to get Costco delivered on Uber Eats without a membership.

20:48I think that's really the big deal here. So with this program that Costco has been testing since 2021, actually, with Uber, it's a select range of products. Of course, you're not going to be able to get everything from Costco on there. Gold bars are also excluded, as Axios pointed out. I thought that was fun. And then, of course, it's at select locations. So it's not going to be available at every club. But yeah, I feel like this is a pretty big deal because the membership itself is one of, I don't know, it's a little bit of a status symbol sometimes among millennials. But we'll talk about why the membership is still pretty important.

21:33Because if you do have it, you are going to be getting bigger discounts. I think like 15 % or 20 % lower prices than if you're not a member. So really, this is more of a luxury service for people who aren't Costco members. Yeah, I mean, this is very clearly a way for Costco to have its cake and eat it too, where, you know, sure, if you want to get it delivered and you're not a member, you can, but you're not going to get the one thing that Costco really offers, which is good prices. And so this makes sense. I will be very interested to know if people actually do use Uber Eats for Costco, but But I don't know.

22:12I'm always interested in general app. I always think of Uber Eats as a restaurant delivery app. But if people are using it for these other different types of services, and I just don't know them, that would be interesting. So I would love to see any type of data in terms of usage and what types of products people are using, both for Costco but for other similar partners. But it's kind of interesting. Yeah, I mean, more and more, it seems like Uber Eats has become just an all-in delivery app versus just restaurants and grocery. And we know we've written a lot about why that is. Restaurant delivery is just not very profitable.

22:54So, yeah. And then, of course, on the Costco front, this is not their first foray into delivery. They already offer same day via Instacart, and you do have to be a member on there. And then they also do a lot of two-day shipping on a pretty wide range of stuff on their website. But this is, of course, a really different type of service. And then, like you said, Uber is just constantly trying to diversify beyond, I mean, Uber, the parent company, beyond rideshare, really, too, because that's something that took a hit during the pandemic. And then the prices really increased. Of course, labor, all of that increased.

23:35And that's also hurting just ridership. I mean, even just part of this program itself, they now have like UberX share and all of these new ways you could ride for cheaper. But we'll see how that works out. But yeah, for the Costco thing. Yeah. So I guess with the higher prices, it's interesting because I don't know how you can make this work economically, you know, especially a lot of these are out in the suburbs. So there's going to be logistics issues trying to get people stuff within two hours or less. I guess my question is, with the higher price, what is the use case? That's always like, do you know what I mean?

24:19I feel like you go to Costco to stock up on things. And also, if you're using Uber, you had your question about logistics. I haven't done too much research into this, but how physically, is it going to be a van filled with big crates and boxes of things? Is that how it's going to be delivered in two hours? But also, is it for a one-off thing? Like, I need toilet paper now. Do you know what I mean? Like, I'm just really interested to see, like, what is the type of customer that they think is using Uber Eats and wants something delivered from Costco in two hours compared to the person who is usually a pretty considered purchase.

24:53It's usually a, I'm going to spend half the day driving to Costco and stock up on all of these things that I need. Am I wrong about that? That's always been my perception of Costco. No, it's true. I mean, especially, you know, families and just people who have space to buy. Yeah, exactly. Unlike us. Yeah, I mean that. And then also I was thinking, I guess that didn't really occur to me until now, but the Uber driver is going to be shopping too for you. I mean, is it an Instacart model? I don't think they've really gone into details about that, but that'll also be interesting to see. But yeah, I mean, I guess you just really maybe want like a rotisserie chicken that night and you don't have a car.

25:36And yeah, it does seem like more specific the more you talk about it. Yeah. And like a rotisserie chicken, it's$8. Am I correct about that? And so you're spending 30 % more or how much is it? I believe it is. I think it's cheaper in the middle of the country. But yeah, it's$7.99 on the East Coast. But I think it was CNBC actually that pointed out like they they checked the app and it's usually like five something in Texas. And on Uber, it was like six something. So, OK, still a cheap chicken. All right. Maybe I'll get really good. Yeah, but then you can't I don't think you could just get a six dollar chicken.

26:12I think you need to like fill that basket. And that's really maybe that's where they really want people to build those baskets. Yeah, it's interesting. So a lot of questions that will only be answered once it's fully deployed and we get a sense for it. But I have a lot of questions. Yeah. Also, I thought, you know, Uber Eats just also striking partnerships with other delivery apps is also interesting. This has been like a trend that's been happening for the like last year or two. But they have a deal with Instacart now and they have a collaboration with GoPuff that kind of just cross pollinates the two platforms.

26:48So it just seems like everything is converging right now. Yeah, I find all of this very interesting. And I've been trying to understand the idea behind it. Like cross-pollination is good. Business collaboration is good. And I feel like you know more about this than I do because you've done some good coverage on this. But is it essentially like there is a shared enemy in the delivery app space and that is DoorDash? Like is that essentially it? Oh, interesting. But DoorDash also has some partnerships. Okay, so maybe I'm completely wrong about that. I've just been trying to figure out, like, why would GoPuff partner with Uber Eats when essentially they're competitors?

27:30Similar with Instacart. But, you know, I guess a rising tide lifts all boats, probably. Yeah, I mean, you know, GoPuff is slightly different in that they have different assortments and they're usually faster. But there's also been some reports that that tends to kind of also create complications in the fulfillment on the fulfillment side. I mean, we talked about GoPuff last week. I think this was one of the ways that they are trying to expand their customer base. So I think I like I mentioned, I think this is really more conducive to the convenience focused shopper as opposed to like big hauls for families, for example.

28:13And then the pricing is a premium. So it's just not going to be the best Costco deal that you're going to get, even online, even through delivery. It'll be interesting to see who uses it, what types of products they're using, and if this is an additive to Uber's grand plan to grow and expand beyond rideshare. So we'll keep an eye on it, I guess. That's a wrap for us this week. You can rate and give us a review anywhere you get your podcasts. You can also follow us on social. We are at Modern Retail on Twitter, LinkedIn, all the good stuff. And then on Thursdays, listen to Kale's interview show.