Under Armour: The Year In Review

Correction: A previous version of this article referred to Under Armour closing its golf and tennis business, as well as downsizing the connected fitness business.  These references were inaccurate and have been removed.

Once considered a rising star in the sports apparel industry, Under Armour (NYSE:UA) is now a struggling company, trying hard to get back on the growth track. After sustaining an average 20% growth since 2010, the company has finally hit the ceiling. The sports apparel manufacturer continues to struggle with a slowing U.S. apparel market, and changing consumer trends. This has significantly hurt the top and bottom lines over the last few quarters.

That said, in order to minimize the impact going forward, CEO Kevin Plank has decided to initiate a restructuring strategy (“a pivot”) that will require the termination of about 2% of the company’s global workforce, while shedding some of its least profitable businesses.

Key Highlights From The Year:

• Probably the most important development coming out of the year, was the management’s strategy to “pivot.” Plank divulged many ideas in this respect, which include, but are not limited to, increasing the product offerings for women and children, focusing more on international markets, offering more lifestyle than performance apparel, and concentrating on increasing its direct-to-consumer channels; basically the opposite of everything the company vied for in the past. While it’s too early to speculate much about this strategy, it seems as though Under Armour understands the urgency to show its investors something positive. 2018 will probably see most of the benefits, if any, of what’s to come.
• In 2017, after years and years of campaigning for its UA Health Box, Under Armour decided to finally cut its losses and kill off the product. We still don’t have much of an idea on what this means for the Connected Fitness business, but it can’t be very good. Additionally, the company is still contemplating on shutting down many other smaller businesses that have failed to add much to the company’s portfolio. Over the years, under the veil of growth, the company managed to stretch itself too thin. Hence, a consolidation of its businesses comes as a very welcome move.
• Footwear, a division that was seeing unprecedented growth over most of 2016, threatening the likes of Nike and Adidas, took a heavy hit in the year. After recording several quarters of heavy growth thanks to the success of its Steph Curry line of shoes, Under Armour witnessed the segment suffer a remarkable decline in sales as the newer Curry 3 failed to impress consumers, while the Curry 4 suffered significant delays. In this respect, the company was forced to let Peter Ruppe, the head of the footwear segment, go. That said, Under Armour hopes to make things right going forward, however it seems as though it will be hard for the company to claw its way out of this one unless they do something drastic.
• On the positive side, while the North American business continued to suffer in the year, Under Armour was making giant leaps and bounds across their international businesses. In Q3 2017 alone, the company recorded a mammoth 35% increase in revenues from outside the U.S. in comparison to the same period last year. While the EMEA market continues to grow at a steady pace, Asia, and particularly China and India, is seeing the bulk of this overall growth. We can expect Under Armour to gain heavily from the region in the upcoming year.

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