Under Armour has started the new fiscal year with an underwhelming set of results, signaling the continued loss of market share as consumers lose interest in the brand, according to an analyst.
The company’s revenue for the quarter ended June 30 slid 3 per cent to $1.1 billion in what management described as a “challenging consumer demand environment”. This comes off the back of a 4.2 per cent dip in the prior year.
The decline was more serious in North America, where sales fell 9 per cent to $610 million. Within international markets, EMEA revenue rose 12 per cent, Apac decreased 7 per cent, and Latin America increased 8 per cent.
“To be fair, the numbers likely contain some deliberate revenue sacrifice because Under Armour is trying to reduce promotions and discounting, which can deplete lower-quality sales. However, from our data they also reflect the fact that consumer affinity for – and interest in – the brand is still waning,” commented GlobalData MD Neil Saunders.
“As much as we recognize that the company is trying to be more disciplined with its assortment and distribution, we still find the offer to be somewhat jumbled and confused.
“On the technical side, there is not a clear enough reason to buy Under Armour products – especially in sneakers, where many of the innovations seem to be coming from newer brands. On the more casual side, Under Armour neither has the brand heat of a player like Gymshark, nor does it have the aesthetic sensibility of a label like Vuori.
“As a result, it doesn’t win in either arena and simply ends up confusing the customer,” he said.
Gross margin for the quarter increased 590 basis points to 54.1 per cent, while net income was approximately $550,000 compared to last year’s loss of $2.6 million. However, the analyst noted that most of these uplifts were driven by a tariff refunds.
For the full year, the company expects revenue to decline at a mid-single-digit percentage rate compared with the prior outlook of a slight decline. This reflects softer demand, particularly in North America and Asia-Pacific.
“Looking ahead, this fiscal year will be one of continued rebuilding rather than one where Under Armour recovers. In other words, the recovery is going to take a lot longer than anticipated. In some ways, this is understandable as the market is challenging and the brand rework is extensive,” said Saunders.
Last year, the company reported a 4 per cent drop in sales and a net loss of $496 million.
