A deep-value turnaround bet on an iconic athletic brand — Under Armour trades at 0.3x revenue with $5B in sales and a new CEO executing a brand-rebuilding strategy
Prem Watsa
Fairfax Financial Holdings
Est. ~1.5% of total portfolio
“Prem Watsa: 'We are natural contrarians. When a well-known brand trades at liquidation prices because of temporary management problems, that's exactly the situation we look for.'”
The Business
- Under Armour is a global athletic performance brand selling footwear, apparel, and accessories across North America, EMEA, and Asia-Pacific
- The company was founded in 1996 by Kevin Plank and built its brand on performance athletic wear, particularly moisture-wicking base layers
- Revenue has declined to ~$5B as the company reduces off-price distribution and rebuilds brand premium
- TTM financials show a net loss of $520M and negative free cash flow, reflecting the depth of the turnaround challenge
Why They Own It
“Prem Watsa: 'We are natural contrarians. When a well-known brand trades at liquidation prices because of temporary management problems, that's exactly the situation we look for.'”
- Under Armour trades at just 0.3x revenue — deeply distressed pricing for a globally recognized athletic brand with $5B in sales
- The brand retains strong awareness and loyalty among athletes and fitness enthusiasts, despite years of mismanagement
- New leadership is executing a turnaround focused on premium positioning, reducing off-price distribution, and growing DTC channels
- Watsa's contrarian philosophy: buy quality brands when they stumble, hold for the recovery — he has done this successfully many times
- At $6/share with a ~$2.6B market cap, even a modest margin recovery would drive significant stock appreciation
What the investor sees
Under Armour trades at approximately $6.40/share with a $2.6B market cap — just 0.3x revenue. For context, Nike trades at 2.5x revenue and Lululemon at 5x. Watsa's thesis is that the brand has significant residual value that the market is ignoring. If Under Armour can stabilize revenue at $5B and achieve even a 5% operating margin (vs. 10%+ historically), that's $250M in operating income — making the stock worth $10-15+. The current price essentially values the brand at liquidation levels.
Financial Snapshot
~$5.0B
revenue ttm
-$520M
net income ttm
~$2.6B
market cap
-$1.22
eps ttm
-$61M
free cash flow ttm
-$201M
operating income
~$6.40
stock price
0.3x
price to revenue
The Moat
- Brand recognition — Under Armour is a globally recognized athletic brand with strong awareness among athletes and fitness enthusiasts
- Performance heritage — the brand was built on genuine performance innovation (moisture-wicking base layers) that retains credibility with athletes
- Global distribution — products sold in major retailers and own DTC channels across North America, EMEA, and Asia-Pacific
- Founder engagement — Kevin Plank's continued involvement provides strategic direction and brand authenticity
What Could Go Wrong
Brand damage may be permanent — years of discounting and overexposure may have irreversibly damaged Under Armour's premium positioning
Operating losses — TTM net loss of $520M and negative free cash flow indicate severe financial stress
Nike, Adidas, and Lululemon competition — dominant competitors with much larger marketing budgets and stronger brand momentum
Revenue decline — top line has been shrinking as the company pulls back from off-price channels
Management execution risk — turnaround strategies in consumer brands have a low success rate
Kevin Plank's dual-class share structure concentrates voting control with the founder
Catalysts
- Turnaround execution — successful premium repositioning driving ASP increases and margin recovery
- DTC channel growth — building direct-to-consumer relationships with higher margins than wholesale
- International expansion — EMEA and Asia-Pacific markets where Under Armour has lower penetration
- Cost restructuring — significant cost reduction program underway to right-size the business
- Brand marketing refresh — new campaigns and athlete partnerships re-establishing premium positioning
- At 0.3x revenue, even a modest recovery creates significant upside — deep value with option-like returns
In Their Own Words
“Prem Watsa: 'Under Armour has a globally recognized brand that athletes associate with performance. Brands with that kind of emotional connection are extremely difficult to destroy permanently.'”
“Prem Watsa: 'At Fairfax, we have a long track record of buying distressed situations and holding through the recovery. Patience is our competitive advantage.'”