Under Armour has posted its results for the first quarter, which an analyst described as a mixed bag amid the brand’s ongoing repositioning.
The company’s revenue for the quarter ended June 30 fell 4 per cent to $1.1 billion, with sales down 4 per cent in North America, 15 per cent in Latin America, and 10 per cent in Apac, but up 10 per cent in EMEA.
By category, revenue slid 1 per cent for apparel and 14 per cent for footwear, while accessories increased 8 per cent.
According to GlobalData MD Neil Saunders, the results are a mixed bag that show some progress alongside several lingering issues.
Saunders believes it is good news that the pace of sales decline has eased and is no longer in double digits. However, the contraction still exceeded that of the overall sports category, which means the brand has lost market share.
“Given the brand’s ongoing repositioning, some deterioration is to be expected. The truth is that Under Armour has had to step back from simply pushing volume and throwing out a scattergun range of products to drive higher-quality sales and strengthen its brand image.
“There is some slight evidence this is taking root: gross margins improved by 70 basis points this quarter, thanks to more disciplined pricing and a better product mix,” he elaborated.
On the bottom line, the company recorded a net loss of $2.6 million, compared to the $305 million loss last year. This includes $13 million of restructuring expenses, which means the firm was operationally in the black when stripping these out.
“Aside from the financials, the bigger question is whether Under Armour’s strategy is working. Our honest answer is partly,” the analyst continued.
“We do see more discipline in ranges and assortments, with some higher-quality products starting to come through. However, there is still not enough storytelling or range clarity to cut through in a crowded market.
“…Basically, in contrast to other brands, Under Armour seems very generalized and does not have the kind of specialism or focus of others. This throws it onto the uncomfortable ground of being a middle-of-the-pack brand: solid, but not compelling enough to be a must-have.”
Saunders expects the brand reset will take longer than normal to bear fruit as it is being undertaken at a very challenging time. The fiscal year ahead will likely be another write-off as the costs of restructuring will join tariff and supply chain pressures to deplete the bottom line, he added.
Under Armour forecasts second-quarter revenue to fall 6-7 per cent and operating income to range from a $10 million loss to breakeven.
