Under Armour sales hit the wall

Under ArmourSportswear brand Under Armour sales have dropped by 12.1 per cent in North America, part of a worldwide trend to hit the once powerhouse brand of sports retail.

In its third quarter update, Under Armour said revenue was down 5 per cent to $1.4 billion while revenue to wholesale customers declined 13 percent to $880 million and direct-to-consumer revenue was up 15 percent to $468 million.

Profit has slumped nearly 60 per cent.

Apparel revenue decreased 8 percent to $939 million, as growth in golf and sportstyle was more than offset by declines in outdoor, women’s training and youth. Footwear revenue was up 2 percent to $285 million, driven by strength in running and outdoor, offset by basketball and youth. Accessories revenue increased 1 percent to $123 million led by golf and men’s training, tempered by a decline in outdoor.

“While our international business continues to deliver against our ambition of building a global brand, operational challenges and lower demand in North America resulted in third quarter revenue that was below our expectations,” said Under Armour Chairman and CEO Kevin Plank.

“Based on these issues in our largest market, we believe it is prudent to reduce our sales and earnings outlook for the remainder of 2017.”

“Against this difficult backdrop, our management team is working aggressively to evolve our strategy and level of execution to proactively address these challenges.

“We understand that success in our next chapter requires managing with focused financial discipline and driving excellence into every area of our business while we amplify innovation, deliver fresh product and connect even more deeply with our consumers.”

“The question arising from the latest set of results is: how did the one-time powerhouse of sports retail lose so much traction so quickly?”, asked Neil Saunders, managing director of GlobalData Retail, who added that with revenue growth moderating for the past couple of quarters, and with North American sales down across the first half of the year, the signs of a slowdown have been present for some time for the retailer.

“Given the gentleness of these previous shifts, it has been easy to pin the blame on external factors such as a tapering down of demand for athleisure apparel, or the bankruptcy of leading sports retailers,” he said.

“The third quarter numbers represent a marked deterioration from those previously modest declines.”

“In our view, this is now about more than external factors; it demonstrates issues with the brand and its proposition. Especially so since other brands and retailers, including Lululemon, have not posted such calamitous figures.”

“This is an abrupt about-turn for a company that, until recently, was on a mission to challenge the might of Nike and other major brands. In our view, there are several reasons for this fall from grace.”

The first of these, said Saunders, is that Under Armour has put down very shallow roots.

“While awareness has soared over recent years and customer numbers have risen, loyalty to the brand is not deep-rooted in the same way that it is at Lululemon and Nike. What this means is that as demand moderated, Under Armour has been quick to drop off the radar of many consumers.”

The second reason relates to Under Armour’s focus with Saunders pointing to Lululemon and Nike possessing “a unifying purpose” to its brand.

“As it has expanded, Under Armour appears to have lost some of its brand essence, and its proposition and purpose have become confused. Admittedly, communication in its own stores and online is better, but in third-party shops the focus is completely lost and, in some instances, Under Armour has become just another brand in a sea of brands.”

Saunders added that a “failure to connect with women” despite attempts to increase its appeal to female shoppers – its brand remains “very masculine” and has limited appeal outside the professional sports market.

 “Under Armour is not so broken that it cannot be fixed. But the days of glory, when it would post double-digit uplifts in sales, are over,” said Saunders.

Comments

Comment Manually

Yop Polls

Easter trading
Should retailers be allowed to open on Easter Sunday?

Twitter

Post-Christmas sales look to be back in vogue as retailers' optimism wanes. https://t.co/4JwLxbiSUn

5 hours ago

Surfwear giant continues turnaround amid choppy conditions. https://t.co/D2M6baOHF5

6 hours ago

Big name retail tenants boost landlord's half. https://t.co/yvuFl7m43s

6 hours ago
x

SUBSCRIBE
FREE NEWS BRIEFS Get breaking news delivered