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A display for Under Armour merchandise is seen inside an athletic store in New York, U.S., August 1, 2017. REUTERS/Shannon Stapleton - RC13D6F5D780
Reuters/Shannon Stapleton
Under Armour is a tough sell lately.
TOMBSTONE

Under Armour is “incredibly disappointed” with its own sales performance

Marc Bain
By Marc Bain

Fashion reporter

Since Under Armour went public in 2005, the company has grown. In just over a decade, its sales rose from about $87 million to just over $1.4 billion. From 2010, every quarter brought impressive new numbers, until last year, when growth hit the brakes.

Now, the growth streak has officially ended. In its last quarter, Under Armour’s sales shrank 4.5%, and profit was down 68.8%. ”We are incredibly disappointed with our 2017 performance,” CEO and founder Kevin Plank said on a call with investors on Oct. 31st.

He talked about the growth of his company in chapters, describing its beginnings as a scrappy startup. The brand was founded on a single product, a sweat-wicking undershirt for football players. In the next chapter, it expanded into women’s clothes, and then started selling internationally. Chapter three saw it go public, scaling up as fast as it could to become the world’s third largest sports brand and a sneaker company as well as a clothing brand.

“We are now dealing with issues related to that growth,” Plank said of the early stages of this newest chapter.

A few different factors have hit Under Armour hard. Its DNA is in performance products, which Plank says represents “90% of what we do.” But in the US, Under Armour biggest market by far, shoppers have shifted toward more casual clothes and shoes that are as much about fashion as performance. Under Armour’s clothing sales, which are still where it makes most of its money compared to shoes and accessories, have taken a dive.

To make matters worse, it’s also mostly a wholesale brand. North American wholesale is about 60% of the business, Plank said on the call. But the retail stores that Under Armour sells through are struggling. Under Armour has seen big partners like Sports Authority declare bankruptcy in the past couple years, and nobody except Adidas seems to be able to sell athletic clothes or sneakers without relying on discounting. Dick’s Sporting Goods, one of Under Armour’s biggest partners, said recently it would ramp up discounts to try to arrest the plunge in its sales.

Under Armour said that promotional environment has hurt the brand and the demand for its products. To address the problem, the company said it’s going to prioritize certain retail accounts in a move much like the one Nike announced last week.

Overseas, at least, Under Armour is still growing fast. But on its home field, it’s selling products that customers aren’t buying, at stores where they’re not shopping—and when they are shopping, they don’t want to pay full price.

Under Armour has been forced to reduce its sales outlook for the rest of the year, sees the pain continuing into 2018.

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