tv The David Rubenstein Show Peer to Peer Conversations Bloomberg February 2, 2019 9:00am-9:30am EST
david: if you could be a great athlete or the ceo of an athletic apparel company, what would you rather do? kevin: i'd take ceo every day of the week. maybe not every day of the week. [laughter] david: if stephen curry comes over your house, does he let you win? kevin: if i win a game against steph curry, that is a problem. david: you are in the apparel business. kevin: that jacket lets you recover your muscles faster. david: i am feeling the blood flowing already. >> would you fix you are tie please? david: people would not recognize me as my tie was fixed.
just leave it this way. all right. ♪ david: i don't consider myself a journalist. nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? thank you for sending over these -- my shoes i got. how come you are not wearing any of them? kevin: i'm a bit embarrassed. they are available on the website too. david: ok. thank you very much. these will make me run faster, right? kevin: jump higher, run faster,
and be a lot more secure in your everyday. david: let's talk about your company you have started, under armour. you had some of the great athletes you have sponsored. take stephen curry, great basketball player. you pay him a fair a lot of money to wear your shoes and he likes them, but if he comes over your house and wants to play horse, does he let you win because you are paying him a lot of money every year? kevin: i would be troubled if i won the game of horse against stephen curry. that would be a problem. david: what about if you want to swim against michael phelps, does he let you win? kevin: i don't know if i would try that. david: what about tom brady? does he throw you the ball softly? kevin: i think these guys only have one speed. david: if you can be a great athlete or the ceo of an athletic apparel company, what would you rather do? kevin: i would take the ceo every day of the week. maybe not every day of the week, i don't know. that is probably a better question that i gave it credit for. [laughter] david: thanks. [laughter]
kevin: you still get hit like in sports. write about it. you really have four games a year with earnings calls and all the work is done long before the press release. david: what year did you start under armour? kevin: 1996, about a mile from where we are now in georgetown. david: when you started the company, did you ever think it would be one of the biggest apparel companies in the world? kevin: i never believed we couldn't do that. when i started -- i never thought -- i don't know if people begin with this vision at 22, 23 years old, but my vision was to build the world's greatest t-shirt for what football players can wear under the pads. from there, what if we made them longsleeved shirts? something for cold weather in addition to warm weather? it was one product at a time to satisfy a need. david: you grew up in kensington, maryland, a suburb of washington.
you decided you are not going to be in academic star, but an athletic star. kevin: i believed i could do both. david: you were a good football player. kevin: i was a good high school football player. david: what position? kevin: fullback and linebacker. david: you ready to get a division i football scholarship but division i was not ready to give you want. you went to university of maryland but walked onto the team. kevin: i disagree with that assessment, but yeah. i went on the team. david: you played all four years? kevin: i did. david: how many people walk on and actually play all four years? kevin: probably unusual, but i think i should have had the scholarship long before.
david: i thought the same thing at duke, i thought i should have gotten a football scholarship but it worked out. kevin: now you can qualify. david: when you graduated, the nfl did not draft you, i assume. kevin: i had to make other plans. david: they made a mistake, they did not draft you. kevin: they were right. david: you wanted to build a company, but where was the idea that came to your head about having a t-shirt that would be better for football players? kevin: i never understood why we wear a shortsleeved cotton t-shirt and a longsleeved cotton t-shirt. the people looked at apparel as another t-shirt as a way to thinking as equipment to enhance your performance and make you better. i sweat like a pig so i needed one. david: how did you go about the idea of designing something or getting somebody to design something to get what you wanted to do? kevin: i went to a local fabric store. i got a piece of women's lingerie. i said do you make anything like this, this synthetic stretch material?
what if you made that for the upper body? the woman at the store in minnesota fabrics of college park, i bought what she had. i took the fabric to a local tailor in beltsville, maryland and said could you make me as many t-shirts that look like this, but out of this fabric? seven prototypes later, i went back in 1996 and they liked them. david: they made the equipment for you, the t-shirts. where did you go to sell it? kevin: i started to the guys in maryland who said they loved them and where could i get more? i read about this place called the garment district in new york city. i got in my ford explorer and parked my car and found a place to buy fabric. i found a place to manufacture and made my first run of 500
shirts and gave free t-shirts to everyone i knew. david: and your car was still there? kevin: no, it was actually towed. [laughter] david: you have the garment, it has been manufactured and now your job is to go on the road and basically sell it to athletes and teams. was that hard? kevin: i put 51,000 miles on my car. i started working my way up to airplane tickets, but i did do these great tours. david: you are the youngest of five brothers. did your older brothers say you are crazy and go get a job? kevin: a little bit of that. not really that nice. i had a tremendous amount of support. my family was great but everyone had their own thing. under armour was not obvious. people would call and trip over the name. what is that thing you are doing? armor all? david: where did you get your initial money? kevin: investors.
i had $17,000 in startup cash and then it was friends and family. there were moments of selling a percent of the company for $5,000. whatever we could do to get the company started. david: what other products did you build? kevin: we let the consumer lead us. our first product was a tightfitting t-shirt for the summer and all of a sudden could you make something for warm weather? could you make shorts? and then you have this essence that becomes the brand that have to translate through every product that we build. it is that continuity that makes it what it is. david: the athletic shoe -- michael jordan's shoe became famous.
if you have an athlete that can endorse a shoe, you can help sell this year but to get shoe, but tothe get athletes to do this, you have to pay that money, right? kevin: it is nice when they love the brand and the product. jordan spieth is a great example of an athlete, he played football and basketball growing up and he loved under armour. stephen curry was an athlete that came to us. he already signed one contract with nike and made a decision to switch. david: how did he decide to pick under armour over the others? kevin: it was actually his three-year-old daughter riley at the time who made the decision. stephen, when making the decision, he had offers from all three brands. stephen was the seventh pick in the draft, three years had gone by and you did not feel he was getting love from his brand. to make the decision, he put
three shoeboxes with a shoe on top and he said, riley, i need to make this choice, tell me what you think. maybe she was one or two. she hobbled up, picked up the first shoe, the adidas shoe, and threw it over her shoulder. she waddled over to the second nike shoe and threw it over her shoulder. she picked up the under armour shoe and said this one, daddy. david: do you have to pay her too? kevin: we might. not a bad idea. david: you are not an athletic equipment business. kevin: it should be stylish and cool, but what makes it great is it actually helps increase your blood flow, helps your muscles recover faster. puts you in better shape. david: ok. i'm feeling the blood flowing already. [laughter] ♪
david: when children or young adults are buying athletic equipment, they might be induced to do so by michael jordan, but for somebody my age or older, are they really going to be induced to buy something because michael jordan endorses it or it really does work for people like me? kevin: are we targeting you? i'm not saying we are or we are not, but our mission statement says to make athletes better. when you can outfit the best in people that really care about every ounce of a product, that builds credibility that allows inspiration. it is nice to know that the very best choose to wear this. david: where are the products made? there is a perception that apparel is made in asia, at the same kind of places and people are paid very low wages. in the end, the same factory
makes things for you, nike and adidas. is that true or not? kevin: i think the global manufacturing process is something that is critical to growing and creating second world and first world economies. if you watch what is happening in china, the elevation of the minimum wage. when i made my first trip to china in 1999, guangzhou was a hot manufacturing bed. now it is the number three tier one city in china and it got there through manufacturing. it is all relative but these are things we do to make sure it is meeting standards and deliver things we want them to be. david: sometimes your products are made in the united states? kevin: of course. very small percentage. we gave up on that a long time ago. david: you are from the washington suburbs. why did you decide to look at the headquarters in baltimore? was a natural place for you to locate headquarters? david: two things.
there was something about the grid of the city that was appealing to me. i moved there in august of 1998. the grid of baltimore was sort of this lunch pail, work boot chip on your shoulder. that is what i wanted the brand to be. the second thing was being the youngest of five boys growing up here, i had a lot of history in this town. it was nice to get a fresh start and baltimore is close enough to mom but far enough to start with a clean sheet of paper. david: how many employees do you have around the world? kevin: more than 14,000. david: how many are in the baltimore area? kevin: about 3500, 4000 if you incorporate one of our main warehouses. david: you have been very involved in philanthropy in many different areas, but one in baltimore and how you outfit at your own cost the athletes of all the baltimore city public schools. is that right? kevin: what i think is neat --
the unique thing about under armour, we have the ability to connect with kids in the way other brands don't. a bank or insurance company, it is nice, but kids want to be around our brand. the things that we do to activate is we have things -- every one of our teammates, as we call them, contributes 32 hours a year. we have something called armour days. we put 12,000 hours of man and woman power together to actually transform three middle schools in baltimore city. for me, the ability to touch up to 500 kids through summer programming, tuition assistance, college education, and other things. the ability to actually affect lives before and lives that need another opportunity are things we are taking on and try to make a difference.
david: the first day the stock goes up 100%. for roughly 26 consecutive quarters, your revenue went up 20% a quarter. that is pretty unusual to keep going up that way. at one point did you realize you cannot keep doing that? kevin: we had a great run from 2010 through 2016 roughly. with that kind of growth, something that has never been seen in consumer retail before. we achieved crossing $500 million, $1 billion faster than any other brand had done in our space. from 13 to 16, $2.3 million to $5.8 million. this is not software that just leverages out the backside, this is infrastructure and facilities and boxes and buildings. a lot of things. david: today, your market value is $9.5 billion but it was
almost double that at one point. when it started going this way, did you think you had to reinvent your company or what did you decide to do? kevin: i think every company, every great company, ever great brand comes to a crossroads where they have to decide how are you going to attack? that is something -- a transformation. that meant a lot of restructuring, a lot of reorganization. we had to do some risk in our company. it has made us a better and stronger company. david: you are not in the athletic equipment business, unlike some of your competitors like, let's say nike, they make athletic equipment. why are you not in that business? kevin: equipment is a tough business. lower margins. i think we effectively believe we bring equipment. our footwear is not just another shoe, it comes with an app. it will help coach you to make you better. it is not because it is stylish or cool. it should be but what makes a great, that jacket you are wearing helps her muscles recover faster to put you in better shape for tomorrow.
[laughter] david: i'm feeling the blood flowing already. in china, very often when i am there, i see knockoffs of american goods and so forth. are there knockoffs you have to worry about? kevin: we have had several lawsuits. i don't know if the lawyers will like this, but you are striving for that moment where people want to knock you off and you want to protect yourself. we have had some crazy lawsuits. they have been resolved in chinese courts. david: let's talk about how the culture of your company -- you were in the news recently for the nature of your inclusion and
not including certain people. you addressed the culture issue. kevin: the hard thing about building a business, the first thing i wanted to do was build a great house. as you grow, you realize the house has become a building. the first thing is that for any entrepreneur is that as the ceo, i'm fully responsible for everything that happens in my company. but what i am required to do and what i am accountable for is when bad things happen. we have been incredibly proactive when it comes to issues that arise that can happen in any organization. we will continue to be proactive and continue to invest in our culture to make sure it is inclusive, diverse. it is something that is an equal opportunity for anyone who wants to join our brand and we encourage that. that is not simply a statement. it is the best thing for our business. david: what are the outside pleasures you really enjoy? kevin: i love driving home, parking my car, walking next door to where my kids go to school, watch my daughter play
david: talk about the athletes -- when you sign up an athlete, is it an arduous process? kevin: you have to work to have the best. athletes are different today. trying to relate with a twentysomething year old, you want to make sure you are speaking to them. today's athlete is incredibly sophisticated. they understand they are a brand. they have a good understanding of what their market value is and they will tell you that. the way to win these athletes,
it is not always through the front door. the army attached to the defeated enemy. if you are at the negotiating table for that to be done, you will lose. when we signed stephen curry, there was a guy named kent bazemore who happens to have his locker right next to stephen. we signed bazemore and then we loaded him with products on a daily basis. it was a thing where his job was to help us sign stephen. eventually stephen said if they take care of you this well, imagine what they will do for me. you have to play chess, not checkers. david: one of your products is pajamas. is that an athletic kind of thing? what is that? kevin: what led to what makes under armour unity is the styling and the fit and the moisture management. but, the consumer actually deserves more. tom brady actually brought to us this idea of this lining. the way he has played well into his 40's is because he actually, when he recovers -- i have seen bruised knees and elbows and he
uses this wrap. this is a first that is fda proven that increases blood flow which increases the speed at which you can recover. when you're playing from one day to the next, you can come back that much better. he asked if we can do a pajama line and people were actually recovering at night. what if we actually put it into the activewear too? one of the things will be launching in spring of 2019 is called rush and recover. david: you are very known for having a white chalkboard in your office. your write things. is that how you encourage people, motivate people? what is the theory? kevin: i have kept it since i started. as an athlete, this is where coaches would put depth chart,
slogans. for me, it is capturing the essence of the brand. overpromise and deliver, dictate the tempo. it says things like trust. it has the things that make and require the dna of under armour. david: you build a great company and made a great deal of money, so what do you do with rest and relaxation when you are not working? what is the outside pleasures you really enjoy? other than interviews like this. [laughter] kevin: i love driving home, parking my car, walking next door to where my kids go to school and watching my daughter play field hockey or watch my son play football. i have a terrific family and i
am very fortunate for that. to have, i think, the ability you get to watch it play out there the eyes of kids. it is not easy being our kids. of course, my kids are required to only where under armour all the time. david: suppose they wore nike, what would happen? kevin: that would be bad, but they would not do that. david: they would not perform as well. kevin: i would be telling them don't ever wear that. love the brand. david: when you are an athlete, you were not a superstar athlete but now the people on your team, do they come to you for jobs? kevin: that happens sometimes. no, if we are in the position -- sports is one of the most important training grounds. i would not be doing under armour had it not been for having played a sport and being in football, for the obvious reasons but more. you learn team, you learn understanding. football is a game that has great pressure on us right now,
but the lessons learned in america without football would concern me more than america without football. david: have you considered signing private equity people? we are athletes too. there are people that might follow my endorsement. you might think about that. kevin: that is a small market. [laughter] kevin: big opportunity though. david: thank you very much. kevin: thank you very much. [applause] ♪
jonathan: from new york city for our viewers worldwide, i am jonathan ferro. "bloomberg real yield" starts now. ♪ jonathan: coming up, another month for the payrolls report. selected and a fed retreat helping junk bonds deliver the best january in a decade. coming off a record-breaking month of european issuance. $255 billion in bond sales. we begin with the big issue, another solid jobs report. >> this is a blockbuster jobs report. >> it is impressive. >> another strong number appeared >> the virtuous cycle continues. >> we are the hottest economy in the world.