Under Armour Asia-Pacific sales surge, but coronavirus impact looms

Under Armour Asia-Pacific sales surged 9.8 percent in the December quarter – a far greater growth rate than the global 3.7 percent.

The sportswear brand, which is struggling to turn around its sagging North American business, also suffered a $15 million net loss for the quarter, largely due to a $23 million tax expense.

Under Armour Asia Pacific sales rose to $183 million and were up 11 percent on a currency-neutral basis, while global sales reached $1.44 billion, up 4.1 percent after currency adjustment.

The company says the improved performance in Asia was due to growth in just wholesale volumes and direct-to-consumer (DTC) sales. However, the company noted that DTC performance was softer than expected due to poor performance in “key e-commerce moments” of 11.11 and 12.12 sales.

CEO Patrik Frisk told an analyst conference call he was “not satisfied with where we are today” despite improvements in systems and infrastructure serving the wholesale and retail network.

The company’s share price fell 17 percent after the results were released in the US yesterday, accompanied by an admission the company was considering closing its Fifth Avenue flagship store as part of further restructuring initiatives to boost performance.

“As a brand, we see a paradox of two challenges in front of us,” Frisk said during the call. “Continued softer demand in North America, as we work through our elevated inventory and multiple years of discounting, and a highly committed cost structure which is taking longer to unpack and is limiting us from being able to spend as aggressively as we would like to increase brand consideration.”

He also warned that the coronavirus crisis in China would significantly impact results in the current first-quarter and may cause supply-chain challenges for the full year. Some 600 stores – two-thirds of its Asia-Pacific network – are currently closed in China and Frisk expects Under Armour Asia-Pacific sales to fall by between $50 million and $60 million due to the virus.

“Given the ongoing uncertainty, it is possible that this situation could have a significant material impact both financially and operationally on our full year, including the potential for additional top-line contraction for Under Armour.”