At its annual shareholders meeting, which was held virtually on Wednesday morning, Patrik Frisk, chief executive officer of the Baltimore-based sports brand, said he was “not expecting a quick return to normal,” and instead is prepared for “the road ahead to be bumpy.”
Although he remains confident in the long-term success of the company due to a heightened focus on health and wellness as a result of the pandemic, it’s going to be a while before that is reflected on the bottom line.
In mid-May, Under Armour reported that losses exceeded $590 million in the first quarter when 80 percent of its own stores, and those of its wholesale customers, were forced to close. For the three-month period ending March 31, revenues were $930 million, down from $1.2 billion during 2019’s first quarter. And losses widened to $590 million, compared with $63 million the same time last year.
While “a handful” of stores in North America and Europe have reopened, Frisk said, along with most of the units in China and South Korea, the “safety protocols” that have had to be implemented have resulted in a different experience for customers.
He said “central to our recovery is the reopening of retail around the world,” and until that happens, Under Armour will continue to cut costs and focus on its digital platforms. Frisk said since mid-March, the brand has seen users of its Map My Run app jump by 275 percent and year-over-year workouts using its connected footwear have increased 200 percent.
The company has also tweaked its marketing message, which was centered around the tag line “The Only Way Is Through,” to “Through This Together” which serves to highlight its online offerings.
“Despite the substantial declines in global revenue since this period began, we’ve been encouraged by the increase in digital-app usage and the relative strength of our e-commerce business,” he said, adding that “revenue has shown consistent strength since the start of the second quarter.”
In response to a shareholder question, Frisk took on the issue of the company’s continued struggles in North America, by far its largest market, where revenue fell 28 percent in the first quarter to $609 million.
He said by focusing on performance product rather than ath-leisure or lifestyle product, Under Armour can “double our market share in athletic performance.” At the same time, he said the company is determined to work on “reducing off-price sales and elevating the premium positioning of the brand in North America,” which is also expected to help.
But not immediately. David Bergman, chief financial officer, acknowledged that as a result of the pandemic, “we’re going to be weighed down by a very promotional environment, we believe, through the rest of the year and some rising inbound logistics costs. But longer-term, as we go into next year and beyond, there should continue to be benefits.”
So while the current situation remains tenuous with further losses expected in the second quarter, Frisk said he continues to be optimistic.
“We have a tremendous amount of confidence in the future of Under Armour,” Frisk said. “Fundamentally, we are running a better company today than ever before. We improved operational processes across the business, we’re managing a stronger balance sheet, we’re controlling our costs more effectively, we’re investing in the brand and we’re driving consideration in our home market and around the world. We believe these improvements will help us weather this storm.”
This was the first annual meeting presided over by Frisk, who took over the ceo role at the beginning of the year from company founder Kevin Plank. Plank, now executive chairman and brand chief, opened the meeting and spoke about the company’s efforts to create and distribute personal protective equipment to health-care workers in its home market of Baltimore since the start of the pandemic, noting that by early June, it expects to have been able to supply five million masks and more than 200,000 gowns to Johns Hopkins and other institutes.
Under Armour shares closed at $8.51, up 8 percent, on the New York Stock Exchange Wednesday.