Under Armour’s 7% revenue growth in the first quarter of 2017 was driven by 13% direct-to-consumer sales growth and 4% growth in wholesale revenue. The brand reported its first ever net loss ($2-m) in the quarter.
Own retailing contributed $302-m to the brand’s $1.1-bn revenue (in currency neutral terms). Apparel sales, which were especially strong in training, golf and team sport, grew 7% to $715-m. Footwear sales, however, grew only 2% to $70-m, following massive growth of 64% last year. Accessories sales – mainly men’s training, running, youth and football – grew 12% to $89-m.
Operating income was $8-m and expenses increased 12% to $498-m. Diluted earnings per share was down $0.01.
The 1% drop in North American sales can be attributed to dealer bankruptcies, CEO Kevin Plank said in a conference call and webcast (http://investor.underarmour.com) to investors. International revenue, however, grew 57% (currency neutral) and now comprises a fifth of total revenue. He also conceded that some mistakes had been made and that the brand was lagging some way behind Nike and adidas in the US (80% of the brand’s market).
After 20% plus quarterly growth in footwear sales since Under Armour introduced the category in 2013, the 2017 Q1 drop in sales came as a huge wake-up call. There was no UA shoe in the Top 10 sneakers (athletic brand shoes) sold in the US in the period and sales of the third edition of Steph Curry’s signature basketball shoe, especially, disappointed. Analysts attribute this to the switch in consumer demand for casual retro basketball styles instead of performance styles, like the Curry shoe. According to the NPD Group, sales of performance basketball shoes declined about 20% last year – and are still dropping.
Curry was one of the Under Armour-sponsored superstars (including Dwayne Johnson and Misty Copeland) to criticise Plank for his positive comments about Pres Trump shortly after his election – comments that did not go down well with consumers still upset by Hilary Clinton’s defeat nor the youngsters who embraced UA as the cool anti-establishment rebel brand. The backlash prompted UA to place an ad in the Baltimore Sun to explain Plank’s comments.