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Under Armour hears a new sound from investors — cheers

Unexpected revenue growth makes up for 2017 operating losses

Under Armour CEO Kevin Plank. (File)

Under Armour CEO Kevin Plank. (File)

Under Armour finished up 2017 with many of the dismal numbers that had made the year so difficult for the Baltimore-based company, but stronger-than-expected revenue growth and international sales introduced a new, upbeat element to the company’s year: a surge in its stock price.

In its fourth-quarter report, Under Armour said it had posted a net loss for the year of $48 million and an operating loss of $37 million for the quarter.

Nonetheless, the company’s revenue was up 3 percent to $5 billion in 2017, with international sales making up for a poor showing in the North American market.

The revenue performance, bolstered by strong sales of footwear and accessories, topped what analysts had been expecting. Much of the company’s success was attributed to the performance of the Curry 4 and Spieth 2 footwear. ColdGear Reactor and Unstoppable apparel collections also provided the company a win at the end of the year.

Under Armour reported strong growth in foreign markets, particularly in Latin America and Asia. The company’s international business surged 46 percent in 2017 and topped $1 billion for the first time.

Direct-to-consumer sales were another bright spot. That revenue increased by 14 percent last year and also was driven by overseas markets.

“After years of rapid growth and building a globally recognized brand, the dynamic landscape of 2017 was a catalyst for us to begin strategically transforming Under Armour into an operationally excellent company,” Under Armour  CEO Kevin Plank said.

Investors responded favorably to Under Armour’s fourth-quarter numbers, with the company’s stock up more than 17 percent.

Tuesday undoubtedly was a welcome relief for Plank and other Under Armour executives. They had slogged through a 2017 watching as their once high-flying company’s stock was pummeled and its strategy, operations and products subjected to withering criticism.

During an earnings call Tuesday morning, Plank and Under Armour President Patrick Frisk hammered home the message that the company is taking needed steps to address its shortcomings.

Where Plank and other Under Armour once described their company as transformational and cutting edge, many of the terms they used Tuesday were right out of the basic business textbooks.

Under Armour’s focus will remain on simplifying operations to produce sustainable and profitable growth for the company. To become more agile, the company will adjust distribution processes, shortening the company’s go-to-market calendar and condensing the timeline from concept to inline.

Less sizzle, more steak.

Plank acknowledged Under Armour had previously been a “loud company and a quiet brand” in 2017. In the new year, Frisk said, the company plans to be “a loud brand and operationally disciplined company in 2018.”

“We have the patience, plan and fortitude to see this through, methodically and successfully,” Plank said.

Frisk highlighted the rollout this month of Under Armour HOVR, a next-generation footwear cushioning platform, used in the HOVR Phantom and HOVR Sonic running shoes, as an example of more efficient operations.

Unveiling HOVR, Frisk said, represented the company’s first 360-degree global campaign. Rolling out that product highlights successful changes in the company’s new go-to-market strategy.

“That product is just a home run,” Plank said.

The company’s optimism comes even as many of its 2018 projections are not markedly different from Under Armour’s current status. Once grandiose projections of rapid growth have been replaced with more grounded expectations.

Under Armour predicts revenue in 2018 will grow in the low single-digit percentage rate. North American revenue is expected to dip by mid-single digits, and international revenue is expected to increase more than 25 percent. Adjusted earnings per share are predicted to be in the 14 cents to 19 cents range.

 

 


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