Under Armour: Slowing North American Sales Weigh on Q1 Top Line
What’s the story behind the slowdown in sales?
As we’ve discussed in this series, Under Armour’s (UAA) top line slowed to 6.6% YoY (year-over-year) growth in 1Q17, compared to 20%+ average growth over the last eight quarters. The main reason for this slowing growth was the company’s below-average performance in North America and its slowing footwear sales during the quarter.
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Why have sales fallen in North America?
North America is Under Armour’s largest market. It accounted for 78% of the company’s sales in 1Q17. Revenue fell 1% YoY to $871 million during the quarter—mainly as a result of recent bankruptcies of retail sportswear partners like the Sports Authority and a highly promotional retail environment.
What’s with footwear?
Footwear, one of Under Armour’s most important categories, grew sales only 2% during the quarter. This growth compares to average sales growth of 55% over the last eight quarters.
The company’s successful Curry Series, which had challenged the dominance of the industry leader, Nike (NKE), last year, has also faced slowing sales. CEO Kevin Plank noted during the 1Q17 earnings call that “warm consumer reception has led to softer-than-expected results” for the Curry 3 series, which resulted in an inventory imbalance. Inventory during the quarter was up 8% to $902 million.
ETF investors seeking to add exposure to UA can consider the iShares U.S. Consumer Goods ETF (IYK), which invests 0.2% of its portfolio in the company.
Read about the company’s 1Q17 margins in the next part of this series.