Where Is The Way Out For Under Armour?

In the past six years, the American sportswear giant

Sales have been growing at an alarming rate.

Recently, Under Armour's performance slowed sharply, and its market value evaporated nearly $3 billion, which was also downgraded by S & P.

Where is the way out for Under Armour?

Over the past six years, the sales of Under Armour, an American sportswear giant, has been growing at an alarming rate, and its sales grew by an annual rate of less than 20% a year.

However, Under Armour's latest earnings report has disappointed Wall Street.

Sales growth slowed sharply to 12% in the fourth quarter of 2016, and is expected to decline sharply in 2017.

As sales growth slowed down, Under Armour's credit rating was downgraded to junk level by S & P International and its rating was also downgraded from BBB- to BB+.

Wednesday's report shows that S&P looks at the prospect of Under Armour's rating.

This rating has dealt a severe blow to Under Armour.

In the past two months, Under Armour (NYSE:UA) has fallen by more than 30%.

Where is the way out for the stock market crash and the downgrade of Under Armour by S & P?

Deviations in sales strategy

Morgan Stanley analyst Jay Sole said in January 31st: "this is the first time since the launch of Under Armour, there has been a significant deviation in sales estimates, which indicates that it is difficult to find enough growth points to offset the weakness of its core business."

At the end of 2016, Under Armour's inventory increased by 17% over the previous year, and analysts said that the company's profit margin would fall in 2017, as it needs to digest inventory through discount sales.

Analysts claim that the growth rate of less than 15% will be the new normal of Under Armour in the future.

large

The bankruptcy of retail chains The Sports Authority and Sport Chalet makes the problems faced by Under Armour more complex and has a great negative impact on its distribution channels.

Corporate credit rating has been reduced to junk level.

As sales growth slowed down, Under Armour's credit rating was downgraded to junk level by the S & P International and its rating was also downgraded from BBB- to BB+. The report on Wednesday showed that S&P looked at the prospect of Under Armour's rating.

This rating caused a serious blow to Under Armour. Last June, Under Armour sold $600 million of bonds. The price of Under Armour's bond fell 4.5 cents, and the current price was 87.75 cents, the biggest decline since its launch, according to the financial regulatory agency bond price reporting system Trace data.

S&P pointed out that Under Armour sales will slow down in the next two years. Due to fierce competition in the North American market, growth will mainly depend on low profit international market and sports footwear business, and profit margins will decline.

Expansion plans, including overseas marketing, will also increase costs.

The S & P downgrade took place on the second day of the latest Under Armour earnings crash.

1, competition in the North American sports retail market is heating up.

Founded in 1996, Under Armour has been relying on continuous product innovation and the courage to break the rules of the market game.

In the rapid development of the past six years, the quarterly sales volume has increased by at least 20%. In 2014, it overtook the German sports giant Adidas to become the second largest sports brand in North America.

However, over the past two years, Nike and Adidas's two biggest competitors have been making great efforts in new products, hi-tech and new generation retail stores. Adidas has achieved a great success with a series of explosive shoes. In 2016, the global sales growth rate is expected to exceed 15%.

Nike is also unwilling to be lonely. The price of some products has been lowered some time ago, so as to better compete with the new Under Armour Sportswear Under Armour Sportswear. The latest quarterly sales and profits are better than expected, and the basketball category products rebound.

In addition, traditional fashion retailers and brands such as Macy, s, Gap and J Crew have launched self-developed sports and leisure product lines to fuel the fiercely competitive sports market.

Even Lululemon, the old rival, who has long been criticized by the Wall Street, has recently surpassed the expected performance report. Through the product innovation, international expansion and expansion of men's clothing category, he has been moving towards the five year goal of doubling sales revenue and more than doubled profits.

{page_break}

The decline of shopping mall in the US mall is becoming more and more serious, and the physical retail industry has been greatly impacted by the electricity supplier and fast fashion. A large number of American traditional fashion retailers such as American Apparel, Aeropostale, PacSun and The Limited have gone bankrupt. Although Under Armour is one of the few brands that still maintain growth in the field of American Apparel Retailing, the decline of shopping mall is still forcing the frequent sale of Under Armour, which has caused tremendous pressure on sales growth.

3. The negative influence of the founder's right to seize power.

The fall in share prices is closely related to the behavior of the founder, chairman and chief executive officer of Kevin Plank, who issued no voting shares two years ago. Kevin Plank's move is to emulate the Silicon Valley technology company, which aims to tighten control and ensure its absolute leadership. At present, he has the economic interest of Under Armour 15%, but he has 65% of the voting rights.

4, lack of fashion elements

At the CES electronics exhibition at the beginning of this year, Kevin Plank said that apple and Samsung would be regarded as potential competitors and more competitive technology companies.

However, yesterday when he was reflecting on the company's development strategy, he said: Under Armour needs to strengthen fashion elements.

"The professionalism of sportswear is still important," he said. "This is the basic demand of people in sports, but people are generally not satisfied with the current sportswear and hope they can be more comfortable and better looking."

In order to move closer to the fashion crowd, Under Armour last year launched the capsule series with the new fashion designer Tim Coppens.

Recently, Under Armour has launched its own design and development of the capsule series - Arris Project bra and tights, while playing the "American made" and "fashion sense" two cards.

The two new products have a simple and stylish appearance. The production process is completed in the United States. The production plant is UA Lighthouse, which is built by Under Armour at the headquarters of Baltimore. It occupies 35 thousand square feet, and 3D printing and design, body scanning, rapid prototyping and other processes can be realized here.

Where is the way out?

According to the world clothing and shoe net, Under Armour is the second largest sportswear brand in the United States in the past two years, and has recently been overtaken by Adidas.

Under Armour's product range is also increasing, including children's clothing and outdoor sportswear, and has signed deals with major league baseball, sports stars and professional teams.

But the biggest problem with Under Armour is that they focus solely on sales of products that improve athletic performance, ignoring fashion products, while Adidas and Nike have a wider range of fashion products.

According to the world clothing and shoe net, 3/4 of sports shoes in the United States are not used for sports.

For example, Under Armour's Curry basketball shoes are better for basketball court performance, unlike Nike Jordan Air Jordan has become a fashion symbol.

Kevin Plank, chief executive of Under Armour, also said that consumers need to become more fashionable when consumers choose more times.

Susquehanna Financial analyst Sam Poser said: "Under Armour performs well on the pitch, but it is not cool enough."

The company said it would increase investment in advanced sportswear business and sell shirts, jackets and coats in luxury department stores such as Barney s.

It is also planning to cooperate with more retailers, and recently signed a new agreement with Kohl s, a department store operator, to sell its products in more than 1100 stores.

However, analysts do not think its emerging fashion business will soon take off.

NPD analyst Matt Powell said: "they will gradually increase their fashion products. Even if the growth is not obvious, I hope they can step by step. I do not expect them to become a high-end fashion brand overnight."

In the future, Andrea will fine tune or change its appearance. We will keep track of brand dynamics.

More interesting reports, please pay attention to the world clothing shoes and hats net.