Under Armour Helps Kohl’s Dodge Worst of Retail Bloodbath

May 11, 2017

Kohl's (kss) is having a bad day, but it could have been much worse.

The retailer reported a much bigger decline than expected in its first-quarter comparable sales, with a 2.7% drop that sent it shares down on Thursday. (Wall Street was expecting a 1.1% decline.)

But Kohl's at least fared much better than larger rival Macy's (m), whose sharp sales decline led to its shares falling 14% to its lowest levels since 2011. Dillard's (adds), another rival, reported a 4% decrease in comparable sales.

What helped Kohl's? The recent launch of Under Armour (uaa) products in its stores in March—the larges such launch in the company's history. According to Kohl's executives, the new lines have exceeded company expectations and given new momentum to the health and activewear category it is trying to be dominant in, and which generates $3 billion a year for it, or nearly 15% of the company total.

"Under Armour exceeded a very aggressive launch sales plan," Kohl's CEO Kevin Mansell told investors on a conference call.

What's more, it seems not to have eaten into Kohl's sales of Nike (nke) merchandise, a huge line for the department store. Mansell said Nike product sales rose in the "high-single digits" in the quarter. Last year, Wall Street firm Jefferies estimated Nike generated $800 million in sales for Kohl's.

The Under Armour success mitigated what were otherwise grim numbers. The sales drop was Kohl's sharpest in five quarters and suggested it is having trouble getting customers to come back. One analyst pegged the traffic decline at about 5%. Kohl's biggest sales decline happened in February, pre-Under Armour launch, with a drop of only 1% in March and April combined.

Kohl's has been fighting hard to protect its shrinking retail market share—pouring $2 billion into tech initiatives in the last three years on things like supply-chain improvements, a tighter integration of stores and online, and shopping apps. In March, in contrast to Macy's and J.C. Penney (jcp), both of which are in the process of closing at least 100 stores, Kohl's said it would make many of its own stores smaller, rather than shutter them.

Its rationale: Stores support e-commerce, offer suppliers an appealingly wide distribution, and keep the retailer top of mind. Mansell told investors on Wednesday Kohl's would redouble its effort to win sales from competitors closing stores in areas where it operates.

For now, Kohl's was able to mollify Wall Street a bit with cost cuts and leaner inventory management that lift profit margins on merchandise. And the Under Armour launch is so far a much welcome success for the retailer.

"Customers are recognizing what's happening at Kohl's in active and wellness, and they're leaning into it," said Mansell.

Now Kohl's just needs to replicate that in other product groups.

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