Under Armour Going Under Water?

Under Armour (UA:NYSE) is engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for men,women and youth. The company is headquartered in Baltimore., MD. The employer of 11,000 was founded in 1996 by Kevin Plank in his grandmother’s basement. Kevin was a football player for the University of Maryland and grew weary of having to change out f the sweat soaked t-shorts under his practice jersey; however, he noticed that his compression shorts stayed dry. One thing led to another and the company’s flagship product was born in the form of a “moisture wicking” undershirt. Among other things, the company also owns the popular fitness app, MyFitnessPal.

The company grew to nearly four billion in net revenues in 2015. Recently, things haven’t been so rosy. Under Armour competes in a hyper competitive environment with companies like Adidas (ADDYY:OTCQX) and Nike (NKE:NYSE). Those two brands have been around for a long time and have a very loyal following. The company reported a much lower than expected earnings per share number this morning and slashed their sales expectations going forward. The company cited “lower North American demand and operational challenges” for the miss. Those are some scary words.

Under Armour could be a company that simply needs to maintain what they have and take a more deliberate approach to their growth. You are not going to outdo Nike and Adidas overnight. Consumers can be fickle and, with athletic apparel, “what goes around, comes around”. Things fall in and out of favor. With the contracts that Under Armour has with high-profile athletes, they are not going to leave the public eye anytime soon. Nike and Adidas experienced some of the same growing pains with certain models of shoes that go from cool to uncool and back. Vans, a brand of VF Corp (VFC:NYSE) has seen a similar roller coaster in popularity.

It will be a bumpy ride.

 

Sources: CNBC, Wikipedia, UnderArmour.com

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