How competition stole Under Armour’s thunder
Under Armour’s (UAA) top line expanded 3% YoY (year-over-year) in fiscal 2017 to $4.97 billion in comparison to an average of 30% growth between fiscal 2011 and fiscal 2016. The slowdown has been a result of the increasing competition from German rivals Puma and Adidas (ADDYY), who took North America market share from Under Armour, as well as Nike (NKE), as customer preferences have trended away from performance wear towards casual wear.
Under Armour was overtaken by Puma to become the number three sportswear brand in 2017. Its position is now being challenged by New Balance, which has recorded an 18% YoY increase in sales to $4.5 billion in fiscal 2017, a tad behind UAA’s $4.97 billion top line.
Under Armour is focusing on product innovation to bring a turnaround
Under Armour has been working hard to pull back its struggling brand. The company is taking initiatives like reducing the lead time between product development and sales, adjusting the product variety to suit customer preferences, making appropriate decisions on the product sale location, and coming out with innovative products that appeal to customers.
UAA’s strategies seem to be working, as its North America sales stood flat in the first quarter of 2017 after falling around 5% in fiscal 2017. Its Project Rock 1 is a good example of its successful strategies, as the product was sold out within 30 minutes of launch.
Stifel analyst Jim Duffy believes that that the second quarter will be a “stepping stone towards stabilization” for UAA. The company is likely to reach inflection in North American during the quarter. He also thinks that the company should be able to meet second-quarter consensus expectations.