Under Armour Set to Sever Ties with Retailers

Under Armour Set to Sever Ties with Retailers

Under Armour (NYSE: UAA) announced Wednesday it is pulling back its merchandise from some retailers and investing into its own stores and website. Additionally, the company reported fourth quarter earnings and provided an initial outlook for 2021. Shares rose 8% in afternoon trading, reaching a 52-week high of USD23.23.

The American sports equipment company revealed plans to end ties with some retailers late last year. Under Armour strives to withdraw from 2,000 to 3,000 partner stores, leaving approximately 10,000 associate retailers still active by 2022.

“That will be a two- to three-year journey for us,” CEO Patrik Frisk told analysts during a post-earnings conference call. “And what we’ll be left with, when we’re through that journey, is really what we believe are more appropriate doors for us — doors that we feel are going to win.”

Under Armour experienced a 25% fall in revenue to USD2.4 Billion in 2020, while its direct-to-consumer sales jumped 2% to USD1.8 Billion. According to the company, amid a 40% rise in e-commerce sales, digital sales accounted for 47% of direct-to consumer revenue last year.

“The reality is, the company is showing restraint and conservatism because they recognize the need to grow healthy and not rapidly,” BMO Capital Markets analyst Simeon Siegel said in an interview. “The idea that a brand will grow to the moon and sell anywhere is a thing of the past. And the retailers that relied on them … will have to look inward.”

The company reported a 3% fall in revenue, amounting to USD1.4 Billion. Net income amounted to USD184 Million, while adjusted net income was USD55 Million.

“Improving brand strength and consistent operational execution delivered better than expected results in the fourth quarter,” said Frisk. “Our global team was exceptionally resilient and disciplined amid a highly challenging year which included the COVID-19 pandemic and for Under Armour, a comprehensive restructuring effort including further operating model refinements.”

Frisk continued to say, “As we continue to navigate uncertainty around the pandemic, we remain focused on execution and the efforts necessary to stabilize our business further and improve our ability to deliver sustainable shareholder value over the long-term.”