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Under Armour Sees Weak Sales but Beats Estimates

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Part 2
Under Armour Sees Weak Sales but Beats Estimates PART 2 OF 7

What Drove Under Armour’s Top Line in 2Q17

What drove Under Armour’s 2Q17 top line

In 2Q17, Under Armour (UAA) reported an 8.7% YoY (year-over-year) increase in its top line to $1.1 billion, beating estimates by $11 million. While the company’s international and direct-to-customer businesses continued to show momentum, they could not offset the impact of slowing North American sales.

What Drove Under Armour&#8217;s Top Line in 2Q17

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“After six-and-a-half years of more than 20% top line growth that ended in the fourth quarter of last year, we are clearly operating in a different environment, particularly in our largest market, North America,” said Under Armour chairman and CEO Kevin Plank, in the company’s 2Q17 earnings call.

North American sales rose a mere 0.3% during the quarter, compared with double-digit growth last year. Under Armour’s North American business represents more than 75% of its top line, and the company is finding it increasingly difficult to compete with Nike (NKE) and Adidas (ADDYY). Read about the company’s performance in key product categories and geographies in the next part of this series.

Under Armour’s restructuring plan

Along with its 2Q17 results, Under Armour announced its new restructuring plan. The company plans to reduce 2% of its workforce and close unprofitable stores. “We’ve identified a number of areas to enhance our operational capabilities, drive process improvement and gain greater efficiencies,” said Plank in a press release.

In June this year, larger rival Nike (NKE) announced that it would cut about 2% of the workforce and eliminate a quarter of its shoe styles to better compete in the fast-changing and highly competitive US sportswear market. Investors seeking exposure to Under Armour could consider the SPDR Consumer Discretionary Select Sector ETF (XLY), which invests 0.13% of its portfolio in the company.

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