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The question with Under Armour’s running shoe launch is how much of the $5bn market it can capture, not how many shoes sold on Day 1 vs. the Cross Trainer launch. The variables, circumstances, and most importantly, the strategy are all completely different.

Over the past week I’ve had at least a dozen people ping me with a question sounding something like… “So I hear UA’s running shoe launch is luke warm. Does this change your view?” This kinda drives me nuts. There is no change in my view because 1) the launches are simply not comparable, and 2) the big call on UA is one that cannot be derailed by a day’s, week’s, or even a quarter’s sales.

Cross training is a $300mm category. Running is $5bn. Nike owns this category with 65% share, and the next largest brand (Asics) at 15%. Past that, there are several more brands that bring up the rear in the 2-6% range. UA is not even on the map. The consumer genuinely wants this brand to succeed. Don’t underestimate that. Every point of share is 3-4% top line growth to UA (not including running apparel). I still don’t see why this company cannot have 3-5% of the US footwear industry over 3 years, which alone grows UA by 2/3.

As for comparisons to last year’s launch, check out the exhibits below. Cross training was backed up by a $5mm superbowl campaign and was geared toward crushing the category in year 1. Running is a slower build. UA will not overship or overpromote this initiative and risk long-term success. Of that I am certain.

People also ask me how I can get comfortable with this name at 20x earnings. I’m not even going to point to historical multiples – bc that argument never ends well and would be ridiculous on my part. But I will say that it has traded more on revenue and cash flow than anything else, and both of those will reaccelerate in 2009. 7x EBITDA for a 20% EBITDA grower? I’ll take that…

Zach Brown
Research Edge