Under Armour has reported a mixed set of results for the fourth quarter, which was somewhat encouraging despite several issues that still need to be addressed, according to an analyst.
The company’s revenue was down 1 per cent to $1.2 billion (down 4 per cent in constant currency) during the quarter ended March 31.
GlobalData MD Neil Saunders said the results show “modest signs of progress, albeit with some very big caveats”.
While the sales line seemed to be stabilizing and saw the best quarterly performance in over two years, it did come off the back of a very sharp decline in the prior year, he said.
North American market sales fell 7 per cent. Saunders said this was well below the prevailing growth rate for sporting goods, underscoring that Under Armour is still losing market share.
“Admittedly, some of this is an engineered pullback as Under Armour tries to become more disciplined with its distribution – but this is not the only reason for the ongoing decline.
“In our data for customer affinity, Under Armour has only shown very modest signs of improvement in the US and remains significantly below many other brands. Many consumers remain confused and somewhat nonplussed with the brand,” he explained.
Foreign markets are performing better, with EMEA sales up 7 per cent, Apac up 13 per cent, and Latin America up 22 per cent.
Although international growth was more modest on a constant-currency basis, it still reflects the higher regard in which the Under Armour brand is held overseas, said Saunders.
On the bottom line, net loss improved from $67.4 million a year earlier to $43.3 million.
“Putting all of this together, we don’t believe there is sufficient evidence to say there is a sustainable recovery at Under Armour,” Saunders said.
“This is especially so as the company remains loss-making and gross margins are still pressured – something that should not be the case if weaker sales channels and product lines are being cut.”
For the full year, revenue dropped 4 per cent on a reported basis and 5 per cent on a constant currency basis to $5 billion, and net loss was $496 million.
The company expects revenue to decline slightly in FY27, with a low single-digit decrease in North America partially offset by low single-digit growth in EMEA and Asia-Pacific.
“The deterioration might be gentler, but it is still deterioration. And it ties back to the fact that Under Armour has still not found its groove in terms of brand positioning or having truly innovative and interesting products that stand out from rivals,” Saunders said.
