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Under Armour improves, but “not yet in full recovery mode”

Under ArmourFitness apparel brand Under Armour saw a 2.4 per cent increase in revenue in the third quarter of fiscal 2018, to US$1.44 billion ($2.19 billion) from US$1.40 billion ($2.13 billion) in the previous corresponding period.

The business saw operational income reach US$119 million ($181.2 million), while net income totalled US$75 million ($114.2 million).

“Our third quarter results demonstrate that our multi-year transformation is on track,” Under Armour chairman and chief executive Kevin Plank.

“As we work through this chapter, we are staying sharply focused on our brand by connecting even more deeply with our consumers.”

Managing director of GlobalData Retail Neil Saunders, however, said the results indicate the business is not yet in full recovery mode.

“Admittedly, the bottom line numbers look healthier – with operating income rising by 91.3 per cent – but most of this is down to the fact that the group has not incurred the restructuring and impairment costs of last year,” Saunders said.

“When these are factored out, operating income shrank by 6.5 per cent. Moreover, in the nine months to date, the group is still loss-making at both operating and net income levels.”

According to Saunders, while Under Armour’s international performance delivered reasonable sales growth, it still accounts for under 25 per cent of the business’s total revenue – with both EMEA and APAC making an operational loss of 8.4 per cent and 0.9 per cent respectively.

He said the slowdown of the athleisure and sports market, combined with an unfocused and confusing product line, is becoming a problem in a market where niche specialists are launching narrow ranges with vision and brand essence.

“Under Armour is caught in a difficult position,” Saunders said. “It has neither the brand power or muscle to be a Nike, but nor is it nimble or niche enough to generate the strong appeal of a smaller label.

“Given how competitive the market is and how difficult it is to solve brand-related issues, we are not particularly confident that Under Armour can easily maneuver out of its current difficulties. We foresee more pain to come before things get better.”

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