Andrew Improved The Inventory Crisis. The Future Development Is Very Optimistic.

The first quarter results show that the US brand

The inventory level was out of control, up 27.3% from the same period last year.

David Bergman, chief financial officer, promised investors that the inventory level would be fixed in 2018.

The inventory problem that plagued Under Armour has been improving.

In June 8th, Wall Street investment bank Jefferies released a client oriented report showing that the inventory level of the sports brand has been significantly reduced, and its profit margin will therefore be promoted.

"As the efficiency of the production line accelerates, inventories will gradually decrease and profit margins will increase, and the fundamentals of Under Armour will change," wrote analyst Randall Kernick Randal Konik.

But Del Kernick did not disclose details of his inventory levels.

He only said that this means that Under Armour next may achieve significant growth, help to ease the pressure of the supply chain, more optimistic than the market forecast.

As one of the most important distributors of brands, Dick s Sporting Goods said at a conference call in the first quarter that they had seen changes in inventories. Dick said

Dick sports chairman and CEO Edward Stack said, "most of the inventory has been cleared up, we are satisfied with the future development of Under Armour."

For major distributors, Under Armour is facing a welcome change.

Since the beginning of 2017, the US brand has been under the pressure of backlog.

Under the influence of insufficient product innovation and over expansion of product lines, its inventory grew by 22% in the third quarter of 2017.

Until the first quarter of 2018, the problem continued to intensify, with an inventory of US $1 billion 150 million during the period, which was equivalent to that of the quarter, up 27.3% over the same period last year, which is more than four times the sales growth rate.

Although quarterly sales and profits both exceed market expectations, Under Armour's inventory problem has a negative impact on profitability.

After a three quarter loss in 2017, the US brand still suffered a loss of $30 million 200 thousand.

In this regard, analyst Sam Poser has pointed out in the report that the inventory level of Under Armour is out of control, and high inventories and high accounts receivable are like a time bomb.

David Bergman, chief financial officer, promised investors at the financial conference that inventory levels would be restored by the end of 2018.

It is worth noting that in June last year, the troubled US brand had announced that

The former The Aldo Group executive Patrick Frisk took over as the founder of Kevin Plank.

After the appointment, products, marketing, supply chain, revenue and strategic departments will report to the new president.

"Patrik Frisk has a lot of experience in global brand building, including improving business performance and profitability, which will help change our business model and provide long-term value for our consumers, customers and investors," Under Armour said at the time.

In fact, the important task of this senior man is to help digest the backlog of inventory, improve profitability and operational efficiency.

Under the leadership of the new president, in the past year, Under Armour has mainly cleaned up excess inventory through discount.

Meanwhile, last year, department store operator Kohl 's became a new partner of Under Armour, and more than 1000 stores began selling their products.

Kohl 's even sold its clothing products at a discount of up to 25%, which was once feared by the outside world, which would weaken its brand image.

In addition to the lack of product innovation, Under Armour has been criticized for launching many types of products compared with Nike focused basketball and Adidas's attention to football. However, it has always been short of key categories. This is one of the substantial reasons for backlog.

To this end, in the second half of 2017, the company also carried out a product line reorganization plan to eliminate some of the poorly sold product lines, focusing on basketball, male training, women, running and lifestyle five categories, hoping that they can bring long-term profitability.

Now, it seems that continuous discount marketing and product line reorganization plan have made some progress in solving inventory problems, and the answers submitted by Patrick Frisk have also been recognized.

But the specific inventory data still need to be released at the end of July, the second quarter earnings report.

Under Armour's share price plummeted nearly 80% from mid 2015 to 2017 due to declining performance.

In 2018, the trend of US brands has improved, and the stock price has risen more than 50% this year.