business

Under Armour Sales Decline as Retailer Cuts Discounts and Promotions to Shift Towards Premium Market

The UBJ Desk

The UBJ Desk

— 2 min read
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Under Armour’s quarterly earnings report revealed a mixed performance, with the company exceeding Wall Street’s expectations on earnings and revenue but facing significant challenges in its core markets.

Financial Performance and Adjustments:

  • Earnings and Revenue: Under Armour’s first fiscal quarter results showed a surprising performance relative to analyst expectations. The company reported earnings per share of 1 cent, adjusted, surpassing the expected loss of 8 cents. Revenue reached $1.18 billion, exceeding the anticipated $1.15 billion. Despite these beats, the company experienced a substantial net loss of $305.4 million, or 70 cents per share, compared to a profit of $10 million, or 2 cents per share, in the same quarter the previous year. Excluding one-time expenses, the company achieved a profit of $4 million, or 1 cent per share.
  • Settlement Impact: The company settled a long-standing securities lawsuit from 2017 for $434 million, shortly before a scheduled trial. This lawsuit stemmed from allegations that Under Armour had misled shareholders about its revenue growth to meet Wall Street forecasts. Although the company did not admit fault, it agreed to settle due to the high costs and risks associated with continued litigation. The settlement will be financed through cash from its revolving credit facility.
  • Revised Guidance: Under Armour revised its full-year profit guidance, now expecting to swing to a loss in fiscal 2025. The company forecasts losses per share to be between 53 cents and 56 cents, with adjusted earnings per share projected between 19 cents and 22 cents. This adjustment reflects a downgrade from its previous expectation of full-year earnings between 2 cents and 5 cents per share and adjusted earnings of 18 cents to 21 cents per share.

Sales and Market Performance:

  • North America: Under Armour’s largest market saw a 14% drop in sales to $709 million, although this was better than the $669.1 million analysts had anticipated. The decline in North American sales underscores the broader challenges facing the company. Wholesale revenue fell 8% to $681 million, while direct-to-consumer sales dropped 12% to $480 million.
  • Online and Store Sales: Online sales experienced a sharp decline of 25%, attributed to planned reductions in promotional activities. In-store sales, specifically at Under Armour-operated locations, fell by 3%.
  • Product Categories: The company’s product segments also struggled, with apparel revenue down 8%, footwear sales dropping 15%, and accessories revenue decreasing by 5%.

Strategic Moves and Restructuring:

  • Leadership Changes and Strategy: Following the departure of former CEO Stephanie Linnartz, Under Armour’s founder, Kevin Plank, has returned as CEO. The company is undergoing a broad restructuring plan aimed at reversing its sales slump and boosting profitability. This includes laying off workers, reducing promotions and discounts, and streamlining product offerings to enhance competitiveness.
  • Acquisition and New Leadership: In a bid to revitalize its brand, Under Armour has acquired sustainable fashion brand Unless Collective. Eric Liedtke, former Adidas executive and founder of Unless Collective, will join Under Armour as executive vice president of brand strategy. Liedtke will oversee brand identity, strategic planning, and transformational initiatives aimed at accelerating growth for Under Armour while continuing to lead Unless.
  • Sustainability Focus: Unless Collective is recognized as “the world’s first all-plant, zero-plastic regenerative fashion brand,” focusing on replacing plastics in apparel and footwear manufacturing with plant-based materials. This acquisition reflects Under Armour’s strategic shift towards sustainability and premium brand positioning.

In summary, while Under Armour managed to exceed expectations on earnings and revenue, it faces significant headwinds, including a major legal settlement and declining sales across its key markets. The company’s strategic restructuring and focus on sustainability may play a crucial role in its efforts to regain market traction and improve long-term profitability.

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