Will Sneak­ers Save Bal­ti­more?

Un­der Ar­mour CEO Kevin Plank thinks so

Bloomberg Businessweek (North America) - - Front Page - BY RACHEL MON­ROE

In March, Un­der Ar­mour won a mi­nor skir­mish in the war for sportswear dom­i­nance when it be­came the first to sell a performanc­e shoe with a 3D-printed mid­sole. The shoe, the UA Ar­chitech, sold out on­line in 19 min­utes. Sure, there were only 96 pairs avail­able, but, as Chief Ex­ec­u­tive Of­fi­cer Kevin Plank says one re­cent af­ter­noon, “Ev­ery­one was try­ing to do it. No one thought that we’d get there first.” Plank is sport­ing a pair of the $300 Ar­chitechs as he tours the Light­house, the new home of Un­der Ar­mour’s in­no­va­tion di­vi­sion in an in­dus­trial tract off the Mid­dle Branch of Bal­ti­more’s Pat­ap­sco River. (It opened on June 28.) Plank’s at­ti­tude seems to ex­ist on a nar­row spec­trum be­tween pumped and su­per­pumped, but the shoes are par­tic­u­larly en­thu­si­asm-in­duc­ing. “They’re like two clouds of awe­some­ness I’m walk­ing on right now,” he says. “I stole that from my 9-yearold, ac­tu­ally. My kids have been watch­ing a lot of My Lit­tle Pony, and it’s rub­bing off on me.”

The shoes’ most no­table fea­ture is a lipstick-red mid­sole that re­sem­bles a whale­bone corset. It’s some­thing you squint at and won­der: How ex­actly did they make that? The short an­swer in­volves poly­mers and a part­ner­ship with Dupont. The long an­swer in­cludes Plank’s plans to rein­vent his com­pany’s sup­ply chain, trans­form the city of Bal­ti­more, and maybe even out­ma­neu­ver Nike in the process.

It’s dif­fi­cult to talk about ath­let­ics com­pa­nies with­out re­sort­ing to sports metaphors. In Un­der Ar­mour’s case, they’re par­tic­u­larly hard to re­sist, in part be­cause sporti­ness is so es­sen­tial to its cor­po­rate cul­ture. Em­ploy­ees call one an­other “team­mates”; 70 per­cent of them played high school sports. The cur­rent head­quar­ters, in south Bal­ti­more’s Lo­cust Point neigh­bor­hood, in­cludes a 35,000-square-foot gym and a bas­ket­ball court that used to be open 24/7, un­til all the drib­bling dur­ing work hours proved too dis­tract­ing. The walls are cov­ered with pho­tos of Stephen Curry and Misty Copeland so large that their beads of sweat are sev­eral inches wide. Plank, a high-en­ergy 43-year-old with gen­tly gray­ing hair, is fond of in­spi­ra­tional analo­gies in­volv­ing fires and races and win­ning. His team­mates speak of him in the rev­er­ent tones usu­ally re­served for coaches.

The phrase “ag­gres­sive, young, fear­less” is plas­tered all over the walls. It’s a quote from golfer Jor­dan Spi­eth de­scrib­ing him­self and the brand, but it could just as eas­ily ap­ply to Plank, who pro­pelled him­self from walk- on to spe­cial­teams cap­tain of the Univer­sity of Mary­land foot­ball pro­gram. Dur­ing his se­nior year, in 1995, the mid-at­lantic was seized by a record- set­ting heat wave, and prac­tic­ing in a sweat­soaked cot­ton T- shirt felt more op­pres­sive than usual. The year af­ter he grad­u­ated, Plank de­vel­oped a mois­ture-wick­ing shirt made from syn­thetic fab­ric and be­gan call­ing up for­mer team­mates. In Un­der Ar­mour’s first year, when the com­pany was still op­er­at­ing out of his grand­mother’s base­ment in the Ge­orge­town neigh­bor­hood of Wash­ing­ton, Plank put more than 100,000 miles on his Ford Ex­plorer driv­ing up and down the East Coast and try­ing to par­lay those friend­ships with for­mer team­mates into or­ders. “I grad­u­ated from col­lege and re­al­ized, I know 60 peo­ple play­ing in the NFL who have ca­reers that are go­ing to be some­where be­tween three and five years,” Plank says. “So the win­dow is about this big. And I ei­ther take ad­van­tage of it now or lose it for­ever. I’m think­ing, Is there a way for me to give them a gift that would also help me? And it’s that vir­tu­ous cy­cle that re­ally got us go­ing.” It worked bet­ter than he ex­pected. A com­bi­na­tion of in­no­va­tive tech­nol­ogy and Plank’s fer­vor for his own prod­uct con­trib­uted to Un­der Ar­mour’s ver­ti­cal rise, from $17,000 in sales that first year, to $400 mil­lion in 2006, to a pro­jec­tion of al­most $5 bil­lion in 2016.

An un­der­dog ethic is still baked into com­pany lore, even though last year Un­der Ar­mour over­took Adi­das to be­come the sec­ond-big­gest sportswear brand in the U.S. In May, the com­pany signed the largest spon­sor­ship deal in the his­tory of col­lege sports, pay­ing $280 mil­lion for a 15-year con­tract with UCLA. Un­der Ar­mour has in­vested more than $700 mil­lion in fit­ness apps and ac­tiv­ity-track­ing tech­nol­ogy, and it hired the de­signer Tim Cop­pens, a fash­ion-for­ward Bel­gian, to help snag a por­tion of the lu­cra­tive “ath­leisure” mar­ket.

These days, Un­der Ar­mour looks like an un­der­dog only when held up against Nike, a rival that Plank and other ex­ec­u­tives refuse to even name. “Five years ago, our largest com­peti­tor was 12 times our size,” Plank says. “Then it was 11 times, then 10 times. To­day, they’re roughly six times our size. But the fact is, they’re still six times our size. So we have a lot of work to do.” He clearly rel­ishes the idea of the world’s big­gest sportswear com­pany feel­ing Un­der Ar­mour breath­ing down its neck. This spring’s NBA fi­nals were the most re­cent proxy bat­tle, be­tween Nike’s Lebron James and Un­der Ar­mour’s Curry, the MVP hero to un­der­dogs ev­ery­where. Curry de­fected from Nike to Un­der Ar­mour in 2013. It hap­pened af­ter Nike of­fi­cials mis­pro­nounced Stephen (as “Steh-fawn”—twice!) dur­ing a re­cy­cled Pow­er­point pre­sen­ta­tion that ac­ci­den­tally in­cluded Kevin Du­rant’s name in­stead of his own, ac­cord­ing to ESPN. James won the re­cent cham­pi­onship, but sales of Curry-branded shoes out­pace those of every other cur­rent NBA player. Un­der Ar­mour’s rev­enue in the

cat­e­gory is up 350 per­cent from last year—a po­ten­tial “tip­ping point,” one Mor­gan Stan­ley an­a­lyst wrote, “sig­nal­ing the end of Nike’s bas­ket­ball dom­i­nance.”

Plank’s ap­pre­ci­a­tion for the over­looked and un­der­es­ti­mated—he’s the youngest of five broth­ers—is man­i­fest in his af­fec­tion for Bal­ti­more. On the sur­face, there may not seem to be much link­ing the edgy, gritty city of John Waters and The Wire with Un­der Ar­mour’s performanc­e-bro aes­thetic. But Plank sees an affin­ity be­tween Bal­ti­more’s hard­work­ing, blue-col­lar past and his com­pany’s re­lent­less striv­ing to be the best sportswear com­pany out there. When pressed fur­ther, he just shrugs and quotes Drake: “‘All I care about is money and the city that I’m from.’ Maybe that’s hu­man na­ture—not the money part, but the de­sire to see the place where you live suc­ceed.”

Although Plank isn’t tech­ni­cally from Bal­ti­more proper—he grew up in a mid­dle-class fam­ily in Kensington, Md., a com­muter sub­urb of D.c.—he has adopted the city as his own. Un­der Ar­mour moved there in 1998, and his per­sonal in­vest­ments have one cri­te­rion: They have to ben­e­fit the com­pany, Bal­ti­more, or prefer­ably both. He’s in­vested mil­lions in sup­port­ing Mary­land tra­di­tions such as horse rac­ing and rye whiskey. In 2007 he pur­chased a 530-acre horse farm once owned by the Van­der­bilt fam­ily. “Blow­ing peo­ple’s minds is one of my fa­vorite things to do,” he says. “I bought the farm—lit­er­ally—be­cause horse rac­ing is an or­ganic part of the cul­ture of Bal­ti­more and be­cause I wanted to bring peo­ple here and show them a Bal­ti­more that blows their mind. Peo­ple like Tom Brady and Colin Pow­ell come up for the week­end and are like, ‘I had a dif­fer­ent image of what Bal­ti­more would be.’ And it’s only 17 miles north of the city.”

By 2013, Un­der Ar­mour was grow­ing at such a fast clip that it was clear the com­pany needed to ex­pand its foot­print in Bal­ti­more. There was never re­ally any ques­tion of leav­ing the city or of re­lo­cat­ing to the sub­urbs, Plank says. In­stead, he set his sights on a seven- acre par­cel ad­ja­cent to the cur­rent head­quar­ters. But af­ter pro­tracted wran­gling with the city, Un­der Ar­mour was turned down. When he got the news, Plank was in Dubai drink­ing whiskey with his chief of staff, who saw a sil­ver lin­ing.

“That land you were look­ing at?” the chief of staff said. “It felt … tight.”

“I just looked up at the sky­line of Dubai, and all I could think to my­self was that 15 years ago, that sky­line didn’t ex­ist,” Plank says. “Un­til some­one with a vi­sion, Sheikh Mo­hammed, said, ‘I’m go­ing to take this old fish­ing town and turn it into the eco­nomic cap­i­tal of the Mid­dle East.’ Out of desert and a fish­ing town. That’s vi­sion. And I’m look­ing out at it and think­ing, Well, what could we do?”

By then, Plank owned a five-acre par­cel in an in­dus­trial part of Bal­ti­more, where he planned to build a whiskey dis­tillery. The land was in a for­mer brown­field site known as Port Cov­ing­ton. That the area was largely un­in­hab­ited was part of its ap­peal, he says. “We wouldn’t be kick­ing out lit­tle old ladies with 30 cats.” Over the next few years, he spent more than $100 mil­lion of his own money buy­ing up nearby real es­tate, ul­ti­mately ac­quir­ing 266 acres un­der the um­brella of his real es­tate in­vest­ment arm, Sag­amore Devel­op­ment.

In April 2015, when Bal­ti­more­ans took to the streets to protest po­lice bru­tal­ity af­ter the death of Fred­die Gray, Plank was trou­bled by na­tional news cov­er­age that made it seem as if the en­tire city was erupt­ing in vi­o­lence, when much of it was un­scathed. He un­der­stood that as a fast-grow­ing com­pany, Un­der Ar­mour would un­doubt­edly play a role in shap­ing the city’s fu­ture. But he was also be­com­ing in­creas­ingly aware that as an in­di­vid­ual with a bil­lion-dol­lar net worth, he too could have a sig­nif­i­cant im­pact. “We don’t have a lot of peo­ple do­ing stuff here [in Bal­ti­more],” Plank says. “I can use the heat and mo­men­tum [of Un­der Ar­mour] and, frankly, my bal­ance sheet to get things started and keep things mov­ing. Some­one’s got to be the first stone in the stone soup. Then some­one else will bring the car­rots and the poul­try. But we’re that first stone.”

In Jan­uary, Sag­amore an­nounced its plans for Port Cov­ing­ton, which in­clude a 4 mil­lion­square-foot head­quar­ters for Un­der Ar­mour and much, much more. Over the next 20 years, Sag­amore in­tends to es­sen­tially build a neigh­bor­hood from scratch. Com­pris­ing al­most 50 city blocks, Port Cov­ing­ton will be larger than Bal­ti­more’s best-known tourist at­trac­tion, the In­ner Har­bor, and one of the big­gest ur­ban re­newal projects un­der way in the U.S. If all goes ac­cord­ing to plan, Port Cov­ing­ton


will be home to 7,500 housing units, a ho­tel, shop­ping, two ligh­trail stops, and a stable for the city’s po­lice horses.

“There aren’t many CEOS who would take their per­sonal cap­i­tal and de­ploy it like this,” says Tom Ged­des, CEO of Plank In­dus­tries, the pri­vately held com­pany that serves as Plank’s per­sonal in­vest­ment arm. “The one ex­am­ple we look at a lot is Dan Gil­bert,” the chair­man of Quicken Loans, who has spent more than $1.5 bil­lion buy­ing up down­town prop­erty in Detroit since 2010. “He’s some­one else who looked at his big com­pany and said, This thing is an en­gine. If I in­vest around it and pull to­gether a crit­i­cal mass, I can re­ally make a sig­nif­i­cant dif­fer­ence.”

In cities strug­gling with postin­dus­trial dis­in­vest­ment and high rates of un­em­ploy­ment and poverty, such in­vestors are of­ten treated as sav­iors. “I would like to also ex­tend a sense of deep ap­pre­ci­a­tion and true ex­cite­ment on the part of the city for what we see pre­sented here,” Bal­ti­more’s city plan­ning di­rec­tor, Tom Sto­sur, said af­ter Sag­amore re­vealed the Port Cov­ing­ton mas­ter plan.

Plank’s ideas for Port Cov­ing­ton have also faced crit­i­cism that cuts against the sav­ior nar­ra­tive, par­tic­u­larly af­ter Sag­amore an­nounced this spring that the ar­range­ment would seek $1.1 bil­lion in sup­port from lo­cal, state, and fed­eral gov­ern­ments, in­clud­ing $535 mil­lion in tax in­cre­ment fi­nanc­ing, or TIF, from the city of Bal­ti­more. The TIF money would go to­ward in­fra­struc­ture im­prove­ments and come from mu­nic­i­pal bonds is­sued by the city to be re­paid by new prop­erty taxes even­tu­ally gen­er­ated by the project. Mu­n­i­cap, a Mary­land con­sult­ing firm that an­a­lyzed the project, es­ti­mates it won’t cre­ate enough tax rev­enue to re­pay the TIF un­til 2038. More wor­ry­ing, per­haps, is that the TIF re­quest is so sub­stan­tial, it would limit the city’s abil­ity to is­sue other bonds with­out hurt­ing its credit rat­ing. “Bal­ti­more is a deeply seg­re­gated city and has been for the past cen­tury,” says Lawrence Brown, a pro­fes­sor of com­mu­nity health and pol­icy at Mor­gan State Univer­sity. “A project like Port Cov­ing­ton, where there’s no fair-housing man­date and no prom­ise for liv­ing wages, is re­ally a missed op­por­tu­nity. It’s reify­ing and in­ten­si­fy­ing the ‘two Bal­ti­mores’ prob­lem we have now.” In its sweep­ing vi­sion and un­prece­dented costs, Port Cov­ing­ton is an ex­am­ple of the in­creas­ing in­flu­ence cor­po­ra­tions are hav­ing on city plan­ning.

Oth­ers are con­cerned about ear­mark­ing so much money for a new devel­op­ment com­pany with no ex­pe­ri­ence work­ing at this scale. Dur­ing a re­cent meet­ing, mem­bers of the city’s Ur­ban De­sign and Ar­chi­tec­tural Re­view Board pointed out that pre­lim­i­nary de­signs for Port Cov­ing­ton looked some­thing like a mil­len­nial day­dream, one that in­cluded a whiskey dis­tillery and mak­erspace, but no post of­fice or fire sta­tion or li­brary or school. (A sub­se­quent plan cor­rected those omis­sions.) Asked if he is wor­ried about crit­i­cism that he’s es­sen­tially build­ing a syn­thetic, Dis­ney­land ver­sion of Bal­ti­more—all crab boils and race­horses—plank says, “Why is that a bad thing? I love Dis­ney­land. The pur­pose of Dis­ney­land is to make peo­ple smile.”

The Dis­ney vibe is hard to ig­nore dur­ing the June tour of the Light­house, the first part of Un­der Ar­mour’s head­quar­ters to open in Port Cov­ing­ton. The rest of the area is still largely un­de­vel­oped, but the Light­house of­fers an early idea of the scale of Plank’s vi­sion for both his com­pany and this part of Bal­ti­more. Plank is an avowed fan of the “wow” fac­tor, which is pre­sum­ably


why en­ter­ing the Light­house has been en­gi­neered to feel a lit­tle bit like step­ping into a theme park ex­hi­bi­tion. Visi­tors walk into a dark­ened cham­ber, where they watch a jump-cut-heavy video that spells out the am­bi­tious idea be­hind the fa­cil­ity: Namely, as other in­dus­tries have cap­i­tal­ized on tech­nol­ogy, gar­ment man­u­fac­tur­ing is stuck in the past. When the video ends, black glass doors slide open to reveal a gleam­ing 133,000-square-foot fa­cil­ity full of hum­ming ma­chines and tech­ni­cians wear­ing white lab coats em­bla­zoned with the red Light­house logo. It’s at once the­atri­cal and in­spir­ing.

This is Plank’s first visit to the Light­house with most of the ma­chin­ery op­er­a­tional, though some mas­sive 3D print­ers won’t be de­liv­ered un­til later in the week. Plank seems jazzed to see the place up and run­ning. The Light­house is not just a new fa­cil­ity but also a prov­ing ground for what Plank calls “lo­cal for lo­cal” pro­duc­tion, Un­der Ar­mour’s goal of man­u­fac­tur­ing its prod­ucts in the same place it sells them. “Even in a very ad­vanced footwear man­u­fac­tur­ing fa­cil­ity, you still have 150 or 200 peo­ple touch­ing every pair of shoes that moves down the line,” says Kevin Ha­ley, Un­der Ar­mour’s pres­i­dent for prod­uct and in­no­va­tion. “It’s ba­si­cally a highly op­ti­mized ver­sion of a Mid­dle Ages cobbler’s bench crossed with a Ford Model T pro­duc­tion line. It’s crazy.” In con­trast, the Light­house will al­low the com­pany to test stream­lined, nim­ble, tech-cen­tered pro­duc­tion lines that may re­quire only a dozen work­ers. If they prove vi­able, they could be set up across the coun­try close to points of sale.

“Vi­sion” is an­other big word for Plank. When he speaks about Port Cov­ing­ton, the Light­house, Bal­ti­more, lo­cal-for-lo­cal man­u­fac­tur­ing, it’s clear that he sees all his plans feed­ing into one an­other. Star­tups us­ing equip­ment at the Foundery, a Plank-funded mak­erspace that’s next to the Light­house, will come up with ideas that Light­house en­gi­neers will in­cor­po­rate into Un­der Ar­mour prod­ucts. Other cut­ting-edge com­pa­nies will re­lo­cate to Bal­ti­more, want­ing to tap all this new en­ergy. Their em­ploy­ees will move to Port Cov­ing­ton and spend, pro­vid­ing the tax base the city so des­per­ately needs. Lo­cal-for-lo­cal may even bring man­u­fac­tur­ing back to the city.

Whether that all proves to be vi­sion or mi­rage is yet to be seen. In any case, when Plank sits down with Ha­ley and Randy Har­ward, se­nior vice pres­i­dent of ad­vanced ma­te­ri­als and man­u­fac­tur­ing, for an up­date on the Light­house, with a re­porter watch­ing, he seems ea­ger to show that he is fo­cused on de­tails. “Five years from to­day, how long is our lead time on the sup­ply chain?” Plank asks.

“You’ll still have some things tak­ing 12 to 14 months, but you’ll have 30 to 50 per­cent of your prod­uct made within three weeks,” Har­ward says. “I hate to use the term Lego—but, well, think of Lego blocks. We’re try­ing to think how [the man­u­fac­tur­ing process] can be it­er­ated in small blocks, rather than where the in­dus­try has been go­ing with these mas­sive, mas­sive, mas­sive ma­chines. So, not us­ing a huge $5 mil­lion ma­chine, but this $9,000 printer that we have right out there.”

Plank leans back in his chair. “But we need to get be­yond nov­elty,” he says. “Peo­ple say they’ll pay more for some­thing made in the U.S., but they won’t ac­tu­ally do it.”

“They won’t be buy­ing it be­cause it’s a nov­elty,” Har­ward says. “They’ll be buy­ing it be­cause we have the right size and the right color and the right de­sign when they want it.”

Un­der Ar­mour is hardly the only com­pany ex­plor­ing how to use au­to­ma­tion and tech­nol­ogy to stream­line sup­ply chains and move pro­duc­tion on­shore. In 2015, Nike said its plans to in­crease do­mes­tic pro­duc­tion could cre­ate as many as 10,000 en­gi­neer­ing and man­u­fac­tur­ing jobs over the next decade. Un­der Ar­mour ex­ec­u­tives say they’re bet­ter po­si­tioned to take ad­van­tage of a rapidly evolv­ing in­dus­try. “Un­der Ar­mour is at that per­fect size where we’ve got enough scale to in­vest the mil­lions of dol­lars it re­quires to take on some­thing like this,” Ha­ley says. “But we’re also small enough that we don’t have a $30 bil­lion sup­ply chain star­ing back at us, say­ing, How are you pos­si­bly go­ing to turn this bat­tle­ship around?”

For Plank, the re­vi­tal­iza­tion project ex­tends be­yond Un­der Ar­mour. “We have 250,000 peo­ple mak­ing Un­der Ar­mour some­thing at any given mo­ment,” he says. “In the next three years, we’ll add an­other 200,000-plus. And zero of them are pegged to come back to the U.S., be­cause we’re all chas­ing cheap la­bor all over Malaysia and the far cor­ners of the earth. It’s a crime. We couldn’t find a way to get 1,000 jobs back here? Or 5,000 jobs? Or 10,000 jobs? When you look at what’s hap­pen­ing in Fer­gu­son, what’s hap­pen­ing in Bal­ti­more—it’s jobs, we need jobs, and we’re shed­ding all our jobs to other places. The abil­ity for us to bring that back, that’s the big idea.”

It’s a long way to even 1,000 jobs. By the end of the year, the Light­house will have just 100 full-time em­ploy­ees, half of them en­gaged in man­u­fac­tur­ing. This fall, Un­der Ar­mour plans to of­fer a ver­sion of its 3D-printed shoe to the wider re­tail mar­ket; it will be man­u­fac­tured in a New Hamp­shire fa­cil­ity that em­ploys only about a dozen peo­ple.

Mean­while, Plank will con­tinue his ag­i­ta­tions, small and large, to sup­port the en­twined fu­tures of Un­der Ar­mour and the city of Bal­ti­more. “It is re­ally hard work, it’s re­ally dan­ger­ous in­vest­ing, it’s re­ally costly, and it’s a re­ally big deal—but I think it’s the right thing to do,” he says. “What I re­ally want to do in life is to build the bad­dest brand on the planet. I would love to do that at the same time as an­chor­ing it in a city that could re­ally use a hug. It seems like such a waste for us not to take ad­van­tage of the mo­men­tum that Un­der Ar­mour has right now.”

Re­cently, Plank was watch­ing the morn­ing news and no­ticed that the na­tional sta­tions showed the weather fore­cast for Wash­ing­ton and Philadelph­ia and New York, but not Bal­ti­more. So he asked the Un­der Ar­mour pub­lic-re­la­tions team to call up the net­works to ask them to in­clude Charm City, too. “It’s about mak­ing sure Bal­ti­more isn’t for­got­ten about,” he says. “Get­ting us front of mind, putting us in that con­ver­sa­tion. Ev­ery­thing we do is about el­e­vat­ing that brand.” <BW>

A new Un­der Ar­mour in­jec­tion mold­ing tech­nique (be­low left); lasts used to form-fit footwear

Clock­wise from left: Plank (cen­ter) at the Light­house; the UA Ar­chitech; Un­der Ar­mour apparel un­der wraps

In April, protesters de­manded a halt in the ap­proval process for $535 mil­lion in city bonds to de­velop Port Cov­ing­ton un­til a new mayor and city coun­cil take of­fice.

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