Under Armour profit tumbles, but it expands product lines

Apparel maker’s earnings hit by bankruptcy of top retailer

Under Armour Inc.’s second-quarter profit fell 57 per cent, hurt by the bankruptcy and liquidation of one of the largest sellers of its products.

Net income dropped to $6.34 million (U.S.) from $14.8 million a year earlier, the Baltimore-based company said in a statement Tuesday. Excluding some items, profit was four cents a share, meeting analysts’ average estimate.

Under Armour has been spending to enhance its e-commerce operations and expand its presence beyond apparel in categories such as footwear and wearable fitness technology. The company also took $23 million of impairment charges in the quarter from the liquidation of the Sports Authority Inc. On the plus side, the company said Tuesday that it will start selling in Kohl’s Corp.’s 1,100 department stores next year, increasing its distribution.

The push into Kohl’s will help to “widen the playing field in terms of access to our brand,” Under Armour chief executive officer Kevin Plank said on a call with analysts.

Under Armour stock had climbed 4.7 per cent this year through Monday. That increase followed gains of 19 per cent last year and 56 per cent in 2014.

Sales advanced 28 per cent to $1billion, matching projections. Still, that marked the first time since 2008 that the company didn’t surpass analysts’ revenue estimates, according to Bloomberg data.

Sports Authority failed to emerge from bankruptcy and is closing its more than 400 stores.

As a result, Under Armour in May trimmed its annual sales forecast to $4.93 billion from $5 billion. That would mark a roughly 24-per-cent year-over-year increase, the smallest since 2009.

To maintain its growth, Under Armour has expanded beyond apparel into sneakers and activity trackers. The brand also plans to dabble in fashion with a line of sportswear, dubbed UAS, that will debut in September in high-end stores.

“UAS will bring a young, fresh and modern voice to sportswear and reflects the insights we’ve gained in the performance brand now applied to the everyday wardrobe,” Plank said.

The move into Kohl’s is both a play to lure more women to the brand and help it out in the West, Plank said.

The retailer has more than 100 stores in California, which will help offset the loss of about 60 Sports Authority locations.

Overall, Kohl’s will boost Under Armour’s distribution points in North America by about 10 per cent.

“There is a massive opportunity with a consumer that is walking into those stores and hasn’t been able to find the Under Armour brand,” Plank said.

Plank also announced on Tuesday that in 2019 the company would take over the Manhattan space of the iconic FAO Schwarz toy store, which closed last year. That will give the brand two company-run locations in the borough. Plank promised that the 53,000-square-foot store on Fifth Avenue will be one of a kind.

“Our goal is to open the single greatest retail store in the world,” Plank said.