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05/01/2018

Overseas sales boost Under Armour Q1 sales, but weakness persists at home

Under Armour is in a slump when it comes to its home market.

The sporting goods giant’s sales rose 6% to $1.19 billion, topping Street expectations, in the quarter ended March 31. But sales in North America fell 0.4%, the third consecutive decrease. Sales in international markets surged 27%, and now represent nearly one-quarter of Under Armour's total sales.

Under Armour's net loss widened to $30.2 million, or 7 cents a share, compared with $2.3 million, or a penny per share, in the year-ago period. The company had restructuring costs of $37.5 million during the quarter. (In February, the brand announced a restructuring plan expected to cost about $110 million to $130 million.) Excluding one-time items, Under Armour’s per share earnings were flat, better than the 5 cent loss analysts has expected.

Similar to other sporting goods specialty retailers, Under Armour has seen its U.S. sales sag under heavy competition from the likes of Walmart, Amazon, Nike and adidas.

In comments, analyst Neal Saunders said Under Armour's poor performance is of its own making, and noted that its image in North America is off-pitch and that its brand strategy remains “extremely muddled.” Distribution is also an issue, he added, with the brand appearing in too many channels, including Kohl’s, as it attempts to grow its business. Saunders said Under Armour’s masculine nature — from its store design to marketing — has made it hard the brand to expand its reach to women.

“This is a lost opportunity as female sports and fitness remain a fast-growth part of the market,” he noted. (For more commentary, click here.)

In a statement, Under Armour chairman and CEO Kevin Plank said the brand expects to meet its targets for the full year.

“Our first quarter results demonstrate measured progress against our focus on operational excellence and becoming a better company,” said Plank. “As we continue to build our global brand by delivering innovative performance products to our athletes, amplifying our story, further strengthening our go-to-market process, and leveraging our systems to create even deeper consumer connections — we remain confident in our ability to deliver on our full year targets."