Under Armour’s retail expansion strategy won’t make up for financial loss, says analyst

By

Rebecca Taras

Published
May 19, 2017

Last month, sportswear brand Under Armour announced its first quarterly loss since 2005. According to Sam Poser—an analyst at SIG Susquehanna Financial Group—the company’s recent strategy to sell its merchandise at Kohl’s, Designer Shoe Warehouse and Famous Footwear will not make up for financial loss. 

While Kohl’s reports the launch of Under Armour merchandise in its stores surpassed expectations, Poser still predicts the retailer will be struggling due to the fact that new retail outlets and short-lived purchasing spurts like back-to-school shopping won’t make up for the loss incurred from copious store closings—last spring Sports Chalet and The Sports Authority closed up shop and MC Sports and Gander Mountain are on their way out this year.

While Edward Stack, chief executive of Dicks Sporting Goods, said Adidas will get more space in his stores in 2017, according to Posner, Dicks has cut back on its orders of Under Armour goods because the brand decided to sell its merchandise in department store chains versus staying exclusive to the sporting goods channel.

So, just how deep in the hole is the sportswear company? Posner predicts that sales accumulated through additional discount retail channels will bring in $104 million—but the company is sitting on a pile of debt to the tune of $140 million due to an amalgamation of bankruptcies and liquidations.  

In terms of any resolution, Under Armour founder and CEO Kevin Plank gave analysts a laundry list of ways the company is going to try and get its head above water, to include focusing on better management, improving on product offerings to keep up with the competition and growing the athleisure sector.