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Kohl’s is Key in Under Armour and Nike’s Race to Reach Women

If it seems like every sportswear brand is tripping over themselves to court women, that’s because they are.

Puma is leading their charge for Millennial women with collections designed by the likes of Rihanna and Kylie Jenner, while Adidas launched the women’s only subscription service Avenue A earlier this year. Then there’s Nike, who has vowed to double sales to women to a whopping $11 billion by 2020, up from $5.7 billion last year.

Central to Nike’s women’s business is Kohl’s, the discount retail chain which helps drive some $800 million in sales of Nike-branded apparel annually. Hoping to get a piece of the action for itself, rival Under Armour announced over the summer that it too would start selling its branded merchandise through Kohl’s.

Slated to hit stores in 2017, Under Armour at Kohl’s will encompass not only apparel, but also accessories, footwear and even home goods, cutting across multiple categories including women’s, men’s and kids.

The deal with Kohl’s comes at just the right time for Under Armour, which was forced to lower its guidance earlier this year in the wake of Sports Authority’s closure.

The Kohl’s account gives Under Armour a new retail channel of some 600 stores, but more important than size is the Kohl’s customer: suburban women who have been underexposed to the brand, and who are asking for more options when it comes to athletic apparel, not just for themselves but for their kids, too.

According to retail expert and Cowen and Company Managing Director John Kernan, women will be central to the success of Under Armour at Kohl’s.

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“Women are critical. Under Armour’s business is well north of a billion in women’s and it can probably more than double over the next four to five years,” he said. “Kohl’s better indexes to women, so it gives them increased exposure [to women].”

But while selling through Kohl’s helps Under Armour grow its women’s business, it also runs the risk of diluting the brand, with similar products at different retailers cannibalizing sales.

Under Armour has attempted to deflect these concerns by launching UAS, a new, high-end collection of apparel to be sold through upmarket channels.

“There’s different consumers and different income demographics in [each] channel. Under Armour will be everywhere from Kohl’s to Barneys. They’ll be in Barneys with their UAS offering,” said Kernan.

“In their ‘Good, Better, Best’ strategy [Kohl’s] is probably going to get their ‘good’ products. Dick’s would probably get the better/best products, so this is going to be at a lower price with a good range of product,” he continued.

While Under Armour still has a long way to go before it approaches Nike’s overall sales—$30 billion last year to Under Armour’s $4 billion—the Baltimore-based company is certainly on a hot streak at the moment, with net revenue growth above 20 percent for 26 consecutive quarters, including a 22 percent jump in its most recent report this week.

“It’s a competitive industry and they’re already taking share from Nike. Nike’s North American business barely grew in the last quarter,” said Kernan.

While athletic apparel and footwear have traditionally been viewed as male-centric businesses, this is changing, if only gradually. According to data from the NPD Group, women’s share of the athletic shoe market in the last two years is up, cutting into men’s share.

Sales of women’s athletic footwear in 2015 totaled some $4.6 billion, 26 percent of the $17.4 billion in athletic shoes sold last year. Sales of men’s athletic footwear represented about 55 percent of the market, down from 57 percent in 2013, when sales of women’s athletic shoes represented only 22 percent of the market.

With the Kohl’s deal, Under Armour is certainly positioned to help these numbers grow, and so far the market seems to be responding well. In September, Wells Fargo upgraded the brand from “market perform” to “outperform,” largely on the perceived strength of the Kohl’s/Under Armour alignment. According to one analyst from Oppenheimer, the deal has the potential to rake in some $200 million in sales during its first year.

“[Under Armour] is one of the fastest growing brands in the world. It will drive traffic to Kohl’s stores,” said Kernan. “[For Kohl’s] it’s a no-brainer.”