Under Armour Sales Crack Under the Weight of Lagging U.S. Demand

Under Armour is feeling the heat from its waning popularity in the U.S. market.

The Baltimore-based brand today blamed lower demand in North America as well as “operational challenges” for lagging third-quarter sales, which fell below expectations. As a result of those issues, the company also lowered its full-year sale and profit expectations, sending shares tumbling in premarket and early-morning trading.

As of 9:30 a.m. ET, Under Armour’s shares were down more than 12 percent at $12.94.

The company said today that its Q3 revenues slid 5 percent to $1.4 billion, missing analysts’ forecast for revenues of $1.5 billion and reflecting challenges stemming from implementation of the company’s enterprise resource planning system as well as a 12 percent decline in North American sales.

“While our international business continues to deliver against our ambition of building a global brand, operational challenges and lower demand in North America resulted in third-quarter revenue that was below our expectations,” said chairman and CEO Kevin Plank. (The brand’s international revenues were up 35 percent in the quarter.)

A rendering of Under Armour’s Tysons Corner store.

While creating new excitement around its footwear has been a challenge for Under Armour over the past year, that segment of the business experienced a modest 2 percent sales gain to $285 million, driven by strength in running and outdoor, offset by softness in basketball and youth. Meanwhile apparel revenue decreased 8 percent to $939 million, as growth in golf and sport style was more than offset by declines in outdoor, women’s training and youth, according to the company.

Overall, Q3 profits were $54 million, or 12 cents per diluted share. On an adjusted basis, net income was $100 million, or 22 cents per diluted share, topping forecasts for EPS of 19 cents per share.

Nevertheless, a slashed full-year outlook now calls for revenues to be up at a low-single-digit percentage rate, compared with a previous expectation for growth of 9 to 11 percent. Meanwhile, adjusted EPS is now expected in the range of 18 cents to 20 cents per share — a significant change from previous estimates for EPS of 37 cents to 40 cents.

“Against this difficult backdrop, our management team is working aggressively to evolve our strategy and level of execution to proactively address these challenges,” Plank said. “We understand that success in our next chapter requires managing with focused financial discipline and driving excellence into every area of our business while we amplify innovation, deliver fresh product and connect even more deeply with our consumers.”

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