What's going on?
On Tuesday, sportswear maker Under Armour reported its first-ever decline in sales as a public company – and slashed its profit and revenue expectations for the year. The share price tanked almost 25%!
What does this mean?
Under Armour is used to experiencing tremendous growth: at the beginning of 2016, revenue was growing by a tidy 30% a year. As the year went on, a slowdown in footwear sales in North America (its largest market), among other concerns, put pressure on the business. Since then, it has posted its first loss as a public company and cut jobs. A further decline in Under Armour’s North American sales was a key driver for the sales slump reported on Tuesday. The CEO blamed store closings, shifting tastes and heightened competition.
Why should I care?
For the stock: Under Armour’s fall from grace continues…
Under Armour stock started falling in the second half of 2016 as its revenue growth began to decline – and the gloom continued into 2017. Even before the results were reported on Tuesday, the stock was a whacking 44% lower than at the start of the year, making it one of the worst-performing in the market. And Tuesday’s news sent shares tumbling even further.
The bigger picture: Athletic wear retailers are scrambling for a piece of a limited pie, with one exception.
Under Armour isn’t the only apparel retailer facing trouble – concerns about a slowdown in the “athleisure” trend abound. Nike cut its sales expectations last month, and Foot Locker reported its biggest sales decline in years a couple of months ago. However, Adidas is bucking the trend in North America, taking market share from Under Armour and Nike and reporting a big jump in sales for the first half of this year, as it wins customers over with its retro Stan Smith and Superstar lines of shoes.