Under Amour’s North American Recovery Slows

Negative impacts from ongoing promotional activity hampered both wholesale and e-commerce sales and have put Under Armour behind schedule on its North American recovery and transformation plan. The company’s FY19 home market revenues declined 2.1 percent to $3.658 billion as Under Armour’s global revenues inched 1.4 percent higher to $5.27 billion in 2019.

Already facing headwinds in China from the ongoing coronavirus epidemic that are expected to depress regional sales across the Asia-Pacific region in the first quarter — and potentially disrupt supply chain flow — Under Armour is forecasting a mid- to high-single digit sales decline in North American sales this year.

The financial performance of Under Armour’s three direct-to-consumer concepts in North America are varied. Brand House stores, while a small percentage of the segment, are showing encouraging improvement. Factory House locations, which comprise 90 percent of the brand’s physical stores and account for approximately two-thirds of North American DTC revenues, are pegged as stable to slightly better this fiscal year. The company intends to reduce promotional activity across its DTC businesses in H2.

“While this may create a revenue headwind,” CEO Patrik Frisk told analysts yesterday, “We believe it is the appropriate strategy to enhance our premium position with North American consumers.”

Meanwhile, the company is contemplating a 2020 restructuring plan of $325 to $425 million. Approximately $225 to $250 million of the total would be related to abandoning Under Armour’s planned flagship store on New York City’s Fifth Avenue. Given its lease obligations remain, a no-go on the flagship would likely result in Under Armour subletting the space.

Frisk, while confirming Under Armour is operationally in a better place today than three years ago, admitted that the brand has more to do. “[This] work that will require us to make tough decisions, further evaluate our cost structure, and sharpen our prioritization to ensure that we continue to put ourselves in the best position possible to achieve sustainable, profitable growth over the long term,” he said.

The brand announced earlier that it is shifting Colin Browne to COO from Chief Supply Chain Officer. He assume the title and responsibilities formerly held by Frisk on Feb. 17. Paul Fipps, Chief Digital Officer, is assuming the newly created position of Chief Digital Officer, where he will oversee the brand’s consumer experience, digital strategy, global retail and e-commerce business.