Under Armour, which has been seen as the biggest up-and-comer in the athletic gear and apparel industry, is finding itself on a new and confounding playing field these days. On Monday, the company reported a decline in sales and slashed its full-year sales forecast for the second time in three months. Shares took a hard tumble, falling more than 15% in early trading.
This is Under Armour’s first quarterly sales drop since it went public in 2005, a development that’s renewed concerns that the company might need to streamline its focus.
Two issues are dogging the company: Continued weakness in North America—traditionally one of Under Armour’s strongest markets—and stronger performances from its competitors.
“Fundamentals at Under Armour continue to erode,” said Tom Nikic, an analyst for Wells Fargo & Co., in a note to clients. “The deteriorating North American athletic market appears to have been the primary culprit.”
Changing consumer trends
Not long ago, consumers wore Under Armour products both at the gym and as a fashion statement, but shifting fashion trends have eroded the brand’s popularity as streetwear. Another possible factor? The company’s retail ubiquity may have hurt its cachet with fans.
In recent years, Under Armour has also expanded into a number of sports that are outside of its core focus, including fishing, tennis, and outdoor gear. It has previously indicated it was rethinking its involvement in those categories and Monday’s results might hasten that decision.
Of course, Under Armour is hardly a company that’s nervous about trying something different. Earlier this month, it launched ArmourBox, a new monthly subscription service that sends customers Under Armour items every month, two months, or three months, according to the subscriber’s wishes.
It’s much too early to determine the success or popularity of that program, so any immediate changes to it would be surprising.
The Adidas factor
Making matters worse, Adidas has proven to be a strong and growing force in the athletic apparel field, stealing market share from both Under Armour and Nike. (Nike, too, has seen its growth slow.)
Adidas raised its 2017 guidance in August and said sales grew 26% in North America in its last fiscal quarter.