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Under Armour reports first-ever loss


Bankruptcies in the sporting goods sector is taking a toll on Under Armour, but the brand still managed to beat expectations in its first quarter.

Our first quarter results were in line with our expectations and we're off to a solid start in 2017," said Under Armour chairman and CEO Kevin Plank. "By proactively managing our growth to deliver superior innovative product, continuing to strengthen our connection with consumers and increasing our focus on operational excellence -- we have great confidence in our ability to drive toward our full year targets."

Under Armour swung to a net loss of $2.3 million, or a penny per share, in the first quarter, from a profit of $19.2 million, or 4 cents per share, in the year-ago period. The loss, which was smaller than the Street expected, was the brand’s first since going public in 2006..

Sales rose nearly 7% to a better-than-expected $1.12 billion, fueled by increases in wholesale and direct-to-consumer revenues. But Under Armour's North American revenue fell 1% due to “the absence of business lost to bankruptcies in 2017," the company said.

Under Armour has lost hundreds of distribution points for its goods this past year amid the ongoing upheaval in the sporting goods area. The sector has been hit with a number of store closings and bankruptcies including Sport Chalet, Sports Authority, MC Sports and, most recently, Gander Mountain. But according to Neil Saunders, managing director of GlobalData Retail, problems in the U.S. sports market are not solely responsible for Under Armour's “lackluster” performance.

“A step up in competition from players, including Nike and Lululemon, is one of the reasons for Under Armour's slower growth,” he said. “This has come at a time when the demand for sports and athleisure products is softening and has created a fundamental shift in the market from one where all players were benefitting from strong growth to one that is much more of a zero-sum game.”

Outside of North America, however, Under Armour has much higher growth potential, according to Saunders.

“Indeed, this quarter international revenues rose strongly,” he said. “We believe that this engine will continue to spin rapidly over the rest of this year. However, the return on these investments will be somewhat lower than those made in Under Armour’s home market. This ultimately means that unless North American growth gets back on track, earnings will remain under pressure.”
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