Under Armour’s North America Struggles Are Still Hurting the Brand

Shares for Under Armour Inc. are down 13% to $24 in premarket trading after the company posted mixed second-quarter earnings results and downward adjusted its outlook for the fiscal year.

The Baltimore-based firm posted a loss of $17 million, or an adjusted loss of 4 cents per share, compared with Wall Street’s expectations of a 5-cent loss. Sales rose 1% to $1.19 billion, narrowly missing analysts’ forecasts of a 2% gain to $1.2 billion.

Investors had been tracking Under Armour’s North America performance after a period of deceleration in the region. The brand said today that its sales there decreased 3% to $816 million — as it struggles to keep up with competitors Nike and Adidas as well as retro labels like Champion and Fila. Its international business, on the other hand, gained 12% to $339 million, representing 28% of the brand’s total revenue.

Previously predicting “relatively flat” revenues in the region for the year, Under Armour updated its 2019 outlook for North America to predict a slight decline. Overall sales are still anticipated to rise in the 3% to 4% range, with a low to mid-teen percentage rate gain in international business. The firm is also reiterating earnings of between 33 and 34 cents per share for the fiscal year.

“Our second-quarter results give us increasing conviction that our transformation continues to make solid progress across our business, unlocking efficiencies that are driving greater precision, consistency and repeatability,” said CEO and chairman Kevin Plank.

He added: “By staying sharply focused on our long-term strategies — driving our premium athletic brand positioning through industry-leading innovation, geographic expansion and creating deep connections with our consumers — we are on track to deliver against our expectations in 2019.”

Footwear proved to be a bright spot for the firm, with revenues in the category climbing 5% to $284 million. Analysts have pointed out the strength of the brand’s Hovr line, which includes the Sonic and Phantom styles, and the Project Rock collection with action star Dwayne “The Rock” Johnson. (Apparel sales dropped 1% to $740 million, while accessories were unchanged at $106 million.)

Wholesale revenues fell 1% to $707 million, and the company saw 35% of its total sales through its direct-to-consumer business, which was up 2% to $423 million.

Under Armour is still in the midst of a turnaround plan introduced in 2017. Its biggest challenge remains the North American market, where sportswear giants Nike and Adidas have been frontrunners in the athletic space for years while the resurgence of ’90s style has helped lead more shoppers to reach for casual styles versus athleticwear.

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