UAA’s Management Expects a Low-Single-Digit Rise in 2017 Sales



Slowing growth at Under Armour

Under Armour (UAA) was considered one of the best growth stories in the sportswear industry until recently. The company grew its top line ~30% between 2011 and 2015 driven by strong innovations and celebrity endorsements. The success of its Curry series challenged the dominance of industry leader Nike (NKE).

However, a change in customer preferences away from performance to retro styles, a rise in competition from German rivals Adidas (ADDYY) and Puma, and recent retail bankruptcies hit the company hard. Not only did sales slow drastically, but sales growth also turned negative during the last quarter.

Under Armour’s top line fell 4.5% during 3Q17 as revenue from North America, which accounts for the majority of its total sales, fell 12%. Though its international business continued to grow, the growth wasn’t strong enough to offset the North American slowdown.

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Competitors’ recent performances

Nike (NKE), which reported its fiscal 2Q17 results in late December 2017, reported a 4.5% jump in its total sales. Strength in international markets mostly drove this rise. Like Under Armour, Nike has been facing challenges in its domestic market. As a result, its sales in the North American market fell 5% YoY. However, North America accounts for less than 45% of the company’s total business—compared to 80% for UAA.

Looking forward

UAA’s management does not expect the company’s North American headwinds, especially in the wholesale channel, to settle down anytime soon. The company has projected a low-single-digit rise in its total 2017 sales.

Wall Street is in line with UAA’s management and has projected a 2% jump in 2017 sales. For the fourth quarter, the increase will be even smaller at only 0.3% year-over-year.

We’ll discuss Under Armour’s key revenue drivers and expected profitability for 4Q17 in the next article.


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