Under Armour struggling against Nike, Adidas in US
Under Armour stock fell sharply Tuesday as competition grows over sneakers and athletic clothing in the United States.
Despite a strong US economy and upbeat consumers, Under Armour’s sales in North America declined 3% during its most recent quarter compared with a year ago, the company reported Tuesday.
Under Armour’s business with outside retailers and its direct sales through its own website and stores both fell last quarter in its home market. Under Armour also lowered its forecast for the region, signaling that the brand expects struggles to persist.
Heading into Tuesday, Under Armour’s stock had gained more than 50% this year. But investors sold off the stock after Under Armour missed Wall Street’s expectations and cut its forecast for North American sales. Shares sank around 15% Tuesday morning.
Under Armour’s international business is strong. International sales grew 12% last quarter, buoyed by growth in Asia and Europe. However, investors focused on weakness in North America, Under Armour’s most important area. North America accounts for nearly three-quarters of the company’s revenue.
“North America is the straw that sort of serves the drink,” CEO Kevin Plank said on a call with analysts Tuesday. The company has been eliminating some products in the United States and cutting sales to lower-priced retailers, which weighed on overall sales.
Analysts pointed to industry competition for Under Armour’s struggles.
Under Armour is having trouble attracting customers in North America, as Nike, Adidas and smaller brands such as Fila and Puma thrive, Cristina Fernandez, analyst at Telsey Advisory Group, said in a note to clients.
Nike’s sales in North America rose 7% last quarter, while Adidas’ sales grew 5% in the region.
“With the sports apparel space becoming increasingly crowded, Under Armour needs to carve out a more distinct and edgy position,” Neil Saunders, managing director at GlobalData Retail, said in a note.
Under Armour hopes to rebound with fabric innovation in its performance clothing and cushioning technology in running shoes.
“The consumer is absolutely willing to side with Under Armour in running footwear if [we] have the right product and the right messaging,” said chief operating officer Patrik Frisk.