Asia Pacific helps Under Armour to get up
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US-based sportswear brand Under Armour has unveiled better than expected first quarter revenue growth of 6 per cent to US$1.2 billion, as weakness in its home market was offset by growing momentum overseas.
Asia Pacific was the strongest individual operating region for the business, with sales increasing by 28 per cent, currency corrected.
However, Under Armour booked a net loss of $30 million in the first quarter, although excluding $37 million in costs associated with its restructuring plan net income was $1 million.
North American revenue declined by 1 per cent in currency corrected terms while its international business saw sales increase by 27 per cent, up 19 per cent in currency corrected terms.
Under Armour chairman and CEO Kevin Plank affirmed the company’s $20-30 million operating income guidance for 2018 on Tuesday in the US.
“Our first quarter results demonstrate measured progress against our focus on operational excellence and becoming a better company,” Plank said.
“As we continue to build our global brand by delivering innovative performance products to our athletes, amplifying our story, further strengthening our go-to-market process, and leveraging our systems to create even deeper consumer connections – we remain confident in our ability to deliver on our full year targets.”
GlobalData Retail MD Neil Saunders said that while there are some positives in the latest result the figures still give the impression that the business has “run out of steam”.
“Overall revenue looks good enough with a 5.8 per cent increase in sales,” he said.
“However, all of this comes from newer markets where Under Armour is buying growth through expansion. There is nothing wrong with this strategy, but it comes with costs attached – which means the contribution to the bottom line is less than impressive.”
“Our first quarter results demonstrate measured progress against our focus on operational excellence and becoming a better company,”
Saunders says Under Armour’s poor performance is solely of the brand’s own making.
“Within North America, we believe that Under Armour’s image is still off-pitch and that its brand strategy remains extremely muddled. Strategically and in terms of its store and distribution footprint, it is clear that Under Armour wants to be a strong lifestyle brand with a wide reach.
Indeed, recent partnerships, such as the collaboration with rapper A$AP Rocky, suggest a push to appeal to younger demographics more interested in fashion than sports.”
Saunders says most consumers do not see Under Armour as a lifestyle brand; they see it as a specialist sports performance brand.
“This limits Under Armour’s ambitions and means that many of the lifestyle initiatives it pursues fall on stony ground. The brand needs to have a much clearer identity, possibility by using sub-brands, before it can gain wider acceptance. Throwing out new products and lines before this clarity is developed is folly.”
He also believes “the masculine nature of the brand” has made it hard to expand its reach to women.
“While store design, marketing, and products remain male-focused, Under Armour will continue to struggle with women. This is a lost opportunity as female sports and fitness remain a fast-growth part of the market.”
He says Under Armour is paying the price for growing too fast and has too broad a set of ambitions.
“The result is a company that lacks a clear vision or point of view. In today’s crowded marketplace this has made it indistinct and easy to overlook. Until this is remedied, growth will remain problematic.”
Questions & Answers
Q.What contributed to Under Armour's net loss in the first quarter?
What contributed to Under Armour's net loss in the first quarter?
Under Armour booked a net loss of $30 million. This was despite a $1 million net income when $37 million in costs associated with its restructuring plan were excluded.
Q.Which region was the strongest for Under Armour's sales growth?
Which region was the strongest for Under Armour's sales growth?
Asia Pacific was the strongest individual operating region for the business. Sales there increased by 28 per cent, after currency correction.
Q.Why does an analyst suggest Under Armour's image is 'off-pitch'?
Why does an analyst suggest Under Armour's image is 'off-pitch'?
The analyst believes Under Armour's brand strategy in North America is muddled. Consumers see it as a specialist sports brand, not a lifestyle brand, limiting its wider acceptance.
Q.What challenge does Under Armour face in attracting female customers?
What challenge does Under Armour face in attracting female customers?
The masculine nature of the brand makes it hard to expand its reach to women. Its store design, marketing, and products remain male-focused, causing it to struggle in this fast-growth market segment.