Under Armour’s (UAA) struggles in North America showed up in its Q4 earnings results as the brand posted $1.44 billion in revenue that was short of Wall Street’s expectations of $1.47 billion. The Baltimore-based athletic company also posted a net loss of $15 million and gave a weaker-than-expected 2020 outlook.
“I’m not satisfied with where we are today,” said new Under Armour CEO Patrik Frisk, who took over for the company’s first CEO and founder Kevin Plank in January.
“As a company, we’ve made significant operational progress in the form of better systems, structure, and processes as well as a considerably stronger balance sheet and the ability to generate cash,” he said on the company’s earnings call.
“As a brand, however, we see a paradox of two challenges in front of us: continued softer demand in North America as we work through our elevated inventory in multiple years of discounting, and a highly committed cost structure, which is taking longer to unpack and is limiting us from being able to spend as aggressively as we would like to increase brand consideration.”
Although Under Armour’s footwear sales are up 10%, primarily driven by its team sports and running categories, the brand grapples with apparel. Its struggles on its home turf of North America also continue to plague the company. Softer North American demand was cited as one of the reasons why revenue in the company’s home market only grew by 2%.
“As our North American business, where our expectation was that we’d, see stabilization by the end of last year and pivot back to growth this year ...However, a combination of demand challenges and distribution dynamics is materially impacting our business. These issues are most evident in our full-price wholesale and e-commerce businesses, leading to an expected mid- to high single-digit decline in 2020 for our North American business,” said Frisk.
Under Armour also estimates that global revenue growth could be down by a little more than 1 point in 2020 due to the ongoing coronavirus outbreak. The company says that it could amount to a $50 million to $60 million Q1 loss.
On the apparel side, revenue was relatively flat compared to the prior year, according to Under Armour. The company also said that the company expects apparel and accessories to be down a low single-digit rate in the upcoming quarter.
“Our target consumer is the focus performer; our brand positioning is the human performance company that gives you the edge to go beyond any limit. And all of this is driven by delivering the world’s most innovative products to fulfill our mission, which is to make you better,” Frisk said during the company’s latest earnings call.
Rivals like Nike (NKE), Adidas (ADDYY), and Lululemon (LULU) have put out gym wear that does double duty as street wear. Under Armour’s failure to fully embrace the athleisure trend has been a detriment to the company, some analysts say.
“Brands that are focused on performance are finding sales growth to be challenging,” NPD Senior Industry Advisor, Matt Powell, told Yahoo Finance.
Under Armour might be softening on the performance-focused model and finally embracing athleisure. “For us, it’s about making sure that we have products that are actually making you better. They need to be innovative. That’s what people are expecting from us, but then ultimately, making them so beautiful that you also want to wear them in different wearing locations.”
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.
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