Under Armour’s profit shrinks by almost 100 per cent on weak NA performance

(Source: Under Armour/Facebook)

Under Armour has reported a 96.2 per cent decrease in profit for the fourth quarter, with North America being the only market to record a sales decline.

For the three months ended March 31, net income was $6.568 million compared to $170.5 million in the prior-year period.

Revenue was down 5 per cent to $1.3 billion, attributed to a 10 per cent decline in North America. International revenue rose 7 per cent, including increases of 10 per cent in EMEA, 1 per cent in Asia-Pacific, and 20 per cent in Latin America.

In terms of product category, apparel revenue decreased 1 per cent, while footwear was down 11. Accessories revenue also slid 7 per cent.

While the brand blamed its weak results on a challenging retail environment, GlobalData MD Neil Saunders believed the blame needs to be placed at its own door.

“Even in a tighter consumer economy, there are plenty of sports brands which are performing well… These brands have focus and have worked hard to ensure they understand customers and can resonate with their needs,” Saunders continued.

According to the analyst, Under Armour’s brand position and assortments are “all over the place”, and a constant change in strategies and management teams did not help.

The brand has always suffered from a weak image in North America, he stated, adding that it also needs to up its game to compete with rivals in international markets. Wholesale is another ongoing area of weakness, particularly in North America, where Under Armour is exposed to some very poor players, according to Saunders.

For the full year, revenue was down 3 per cent to $5.7 billion, including an 8 per cent drop in North America and a 9 per cent increase in international markets. Net Income was $232 million, compared to $374 million in the prior year.

The company expects revenue to decrease at a low-double-digit percentage rate this year, including an expected 15 to 17 per cent decline in North America.

“Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions to build a premium positioning for our brand, which will pressure our top and bottom line in the near term,” said Under Armour president and CEO Kevin Plank. 

Saunders believed the company is moving in the right direction with this strategy, but it will require time and some painful decisions that will negatively impact the numbers to reposition the brand. 

“As such, the year ahead is going to be a very painful one for Under Armour,” he concluded.

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.