Under Armour Is Working Hard to Turn Things Around — But Nike & Adidas Are Making it Difficult

Analysts and Under Armour’s management can agree on one thing: Orchestrating the brand’s turnaround will be no overnight feat.

On the lead-up to the Baltimore-based athletic label’s first-quarter earnings release, due before the market open Thursday, several market watchers have noted that they anticipate a widening gap between the company — which has been working to recalibrate its business for close to two years — and competitors such as Nike and Adidas.

“Our industry checks indicate a lack of enthusiasm and interest for Under Armour product from retail partners,” wrote Susquehanna Financial LLLP analyst Sam Poser on Apr. 14. “With Nike firing on all cylinders and heritage brands such as Champion, Fila, and others re-emerging, we see little sign Under Armour will reclaim lost shelf space any time soon.”

Poser, who holds a “negative” rating on the stock, went on to criticize the brand’s renewed focus on the performance category — a move it announced at its investor day in December — describing the strategy as indicative of management’s “myopic view.”

Meanwhile, Wedbush Securities analyst Christopher Svezia is remaining “neutral” on the brand, noting “commendable progress” as well as improving trends on its home turf, where it had been particularly challenged. Still, Svezia also expressed concern that, as the brand charts its path to recovery, its competitors are gobbling more of its market share.

“Though UA’s inventory in the [North America] region is healthier and the brand is seeing some success with product including HOVR and Project Rock, it remains to be seen whether brand demand is sufficient in the face of heightened domestic competition [from] Nike, Adidas, Puma, Hoka One One and others,” Svezia wrote last week.

In a study released this month, Canaccord Genuity Inc. also found that when it comes to consumers’ perception of brand innovation, Nike is gaining ground in the mid to upper income male demographic ($60K- $150K) while Under Armour is wavering with the demographic.

“This suggests that the brand’s once premium status has faltered among higher earners, likely due to its channel expansion decisions and poor segmentation,” analysts Camilo Lyon and Pallav Saini wrote in a research note.

In 2017, Under Armour, which had experienced a stretch of softening sales and lagging momentum, rolled out a multi-year restructuring plan — and sense then brand president and COO Patrik Frisk has been adamant that the process would stretch out for a few years.

Ahead of Thursday’s report, consensus estimates peg Under Armour’s Q1 profits and revenues as flat year over year at 0 cents and $1.19 billion respectively.