Warriors G Stephen Curry is "turning out to be no Michael Jordan when it comes to staying power in the sales of pricey athletic shoes, a likely source of disappointing earnings for maker Under Armour that resulted in a stock plunge" yesterday, according to Nathan Bomey of USA TODAY. Slowing sales for the "high-end shoes branded under" Curry's name "appear to have contributed to poor results" for UA in Q4. UBS apparel analyst Michael Binetti in a note to UA investors wrote that interest in Curry's shoe lineup "seems to have moderated." Bomey notes Curry "hasn't had a smooth ride when it comes to hawking shoes," but his shoe sales "weren't Under Armour's only problem." Binetti noted that UA "slumped amid rising holiday shopping discounts." The pace of UA's growth is "slowing down, a discouraging sign for investors." For '16, revenue was up 22%, but the company projected that '17 revenue growth "would slow to 11% to 12%" (USA TODAY, 2/1).
WHAT'S GOING ON? UA Founder, Chair & CEO Kevin Plank said UA's merchandise assortment at the end of the year was "out of balance," with a growing demand for lifestyle sports apparel leading to lost sales. Plank: "Performance is not dead. Performance is something that's a requirement. We need to become more fashionable with the products we have out there." In Baltimore, Lorraine Mirabella in a front-page piece notes UA is "shifting toward less reliance on retail partners by building out its branded stores and websites and moving more into a largely untapped global market." Plank said the company will be "better positioned to deal with imbalances like this going forward." Plank: "We're working to evolve our selling strategy to better align with what consumers want, with what consumers need" (Baltimore SUN, 2/1). CNBC contributor Stephanie Link said UA has "real issues with regard to performance-focused products and apparel products." Link: "The company has to spend a lot of money now to actually revamp their products and it’s just going to take time." CNBC contributor Steve Weiss noted some of the products UA has been developing are more like "fads" and are also "expensive" ("Fast Money Halftime Report," CNBC, 1/31).
TIME TO REFOCUS: The WALL STREET JOURNAL's Germano & Steele note UA "missed its revenue target after 26 straight quarters of at least 20% revenue growth." The "slowing growth, coupled with unexpected declines in quarterly profit, fanned fears" about UA’s ability to continue to win market share from Nike and adidas "without heavier discounting." Industry sources said that the results "prompted skepticism on Wall Street, which had long held the apparel-and-footwear maker in high regard for its consistent rapid growth." But after UA's "rapid ascent from college locker rooms to mass retailers, the company must now cope with a shift away from performance equipment, fewer visits to retail stores and increased competition from new players in the athletic-apparel market." Plank yesterday on a conference call "defended his business strategy," though he "admitted the company needed to refocus" (WALL STREET JOURNAL, 2/1). Susquehanna analyst Sam Poser said of UA, "There's very little that kids are going to wear to just go out and look cool and the problem is that cool factor has to be organic and they have to be fast at doing it. But if they're hasty they could blow themselves up" ("Fast Money Halftime Report," CNBC, 1/31).
WE NEED TO TALK ABOUT KEVIN: In N.Y., Jennifer Saba wrote UA's "founder-led approach is wearing thin," and Plank's "strategy of maintaining power is underperforming badly." UA's signature compression shirts, which emphasize athletic performance, "face growing competition from a slew of competitors." Nike, adidas, Lululemon, Macy’s, Gap and J. Crew are "just a few brands that are pushing their own athletic wear" (NYTIMES.com, 1/31). The WALL STREET JOURNAL's Miriam Gottfried writes UA has "long promised a lot and then delivered." But yesterday, it "didn’t come through, and now investors need to understand the costs of that impressive winning streak" (WALL STREET JOURNAL, 2/1).
STYLE POINTS: QUARTZ' Marc Bain wrote UA "must accept that it can’t rely solely on its performance wear." The sportswear landscape is "shifting, and customers no longer want athletic clothes just for working out." They want "stylish athleisure -- clothes fashionable enough that they can also wear them out to a movie or dinner." If UA is to compete with Nike and adidas, "that’s one area where it needs to do better." Bain: "If UA can truly crack athleisure, there’s potential for huge rewards" (QZ.com, 1/31). WOMEN'S WEAR DAILY's Evan Clark noted UA will be "sticking by its performance offering, but upping its style quotient." Fashion is not a "foreign concept" to UA, as the company last year "teamed with designer Tim Coppens to create a temporary sportswear line," Under Armour Sportswear. More style "might well be on the way -- and it could come just in time" (WWD.com, 1/31).
