Under Armour’s ‘days of glory’ over
Apparel giant lowers outlook again as basketball shoes and youth products struggle
NEW YORK— Under Armour’s slump deepened in the third quarter as sales of women’s training apparel, outdoor outfits and basketball shoes suffered.
The apparel giant also acknowledged that it had bungled the implementation of a major internal software program, leading to a selfinflicted wound for its financial performance.
Although sales directly to consumers jumped, international revenue was strong and golf products showed positive signs, Under Armour was forced to lower its full-year sales and profit forecasts for the second straight quarter.
Basketball shoes continued to struggle for Under Armour, which has bet big on its sponsorship of Golden State Warriors star Steph Curry.
The disappointing results signal that Under Armour’s recently announced plan to shed up to $130 million (U.S.) in costs by slashing jobs, facilities and inventory was not enough to right the ship.
“Against this difficult backdrop, our management team is working aggressively to evolve our strategy and level of execution to proactively address these challenges,” Under Armour CEO Kevin Plank said in a statement.
“We must operate a better company; 2017 has been a reset year for Under Armour.”
The company’s third-quarter revenue tumbled 4.5 per cent to $1.41 billion, falling short of S&P Global Market Intelligence estimates of $1.49 billion. That included an 8-percent decrease in apparel revenue, a 12-per-cent decline in overall North America revenue.
Net income of $54 million missed expectations of $75 million.
“The question arising from the latest set of results is: How did the onetime powerhouse of sports retail lose so much traction so quickly?” said Neil Saunders, managing director of research firm GlobalData Retail, in a research note.
Factors include declining sales of sports apparel, missteps in distribution and struggles in appealing to women, Saunders said.
“Under Armour is not so broken that it cannot be fixed. But the days of glory, when it would post doubledigit uplifts in sales, are over,” Saunders said.
One unusual element of Under Armour’s third quarter was the admission that it suffered “operational challenges” due to the implementation of a comprehensive software program known as an enterprise resource planning system.
Used by many major corporations to manage things such as accounting, inventory and customer relationships, the system was so crucial to Under Armour’s business that it undermined the company’s outlook.