Why Under Armour Is Taking the Heat for Dick’s Sporting Goods’ Struggles

Under Armour‘s new strategy may be putting it back on track toward U.S. sales growth — but at least one of its wholesale partners is none too pleased with it.

On Wednesday, Dick’s Sporting Goods CEO Edward Stack called out the Baltimore-based brand for contributing to the retailer’s slipping same-store sales, which fell 4 percent during the second quarter over the same period last year.

“We delivered double-digit growth in e-commerce, private brands and athletic apparel — excluding Under Armour — however, as expected, sales were impacted by the strategic decisions we made regarding the slow-growth, low-margin hunt and electronics businesses, which accounted for nearly half of our comp decline,” Stack said in an earnings release. “In addition, we experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution. We are very confident our sales trajectory will improve next year as these headwinds are expected to subside.”

Under Armour has cast a wide net in its attempts to turn its business around following a period of wholesale-partner problems, management issues and changing consumer tastes. Importantly, it expanded to more than 1,000 Kohl’s stores around the country in 2017, a deal that the department store’s CEO said “delivered very strong growth” in the same quarter that Dick’s Sporting Goods’ sales slid, suggesting one business could be cannibalizing the other.

While Dick’s also raised its earnings guidance for the year to $3.02 to $3.20 per diluted share, from the previous range of $2.92 to $3.12, that positive note wasn’t enough to keep investors from getting spooked. The sporting goods chain’s stock was down more than 6 percent as of 11:45 a.m. EST. Under Armour shares took a hit, too, falling below the $20 mark they’ve mostly maintained or traded above since May amid concerns the wholesale partnership could be in trouble.

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