Under Armour is making some big moves – both at wholesale and retail.
The activewear firm on Tuesday revealed plans to launch a new brand this fall, to be called Under Armour Sportswear, in an effort to bring more consumers to the brand. Under Armour chief executive officer Kevin Plank said the product would be sold in new flagships as well as at wholesale and online.
“We don’t believe that Under Armour technology should be exclusively for on the field, we don’t see as an either/or thing. UAS is forged from the field and built for life,” Plank said.
The product will bring a young, fresh, modern voice to sportswear, but Under Armour says it isn’t chasing the ath-leisure trend. While Under Armour is partnering with the high end for a best-in-class collection, the launch is predominantly direct-to-store so as not to be confused by the main Under Armour product.
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Under Armour will be partnering with Kohl’s Corp. to sell product and expects it to be in the stores in 2017. The sports company believes that female customers in this market are a big opportunity to expand the business. It also expects to be in about 600 stores to start and with 100 Kohl’s doors in California, it will help soften the blow of Sports Authority closing up shop — particularly in the market there.
Under Armour also is continuing to take big strides with its own retail. The company on Tuesday said it was taking over the FAO Schwarz space in New York on Fifth Avenue. Under Armour said it will use the 53,000-square-foot space to create a unique retail environment. The store will be located across the street from Bergdorf Goodman and Bergdorf Goodman Men’s, behind Apple’s Fifth Avenue flagship and not far from stores for brands including Bulgari, Tiffany and Louis Vuitton. The space will give Under Armour a major profile in one of the most heavily trafficked corners in Manhattan and fits in with the company’s strategy of opening what it calls “Brand Houses” in high-profile locations worldwide.
The company revealed the new brand and real estate deal in reporting that net income for the second quarter fell 58 percent to $6.34 million, or 1 cent a diluted share, down from $14.8 million, or 3 cents, a year ago. The FactSet estimate was for earnings of 4 cents a share. The realized diluted loss per share for class A and B shares was 12 cents and diluted earnings of 15 cents for class C shares. The class C shareholders received a $59 million stock dividend.
Sports Authority’s bankruptcy earlier this year led to Under Armour taking a $23 million hit. Net revenues for the three months ended June 30 increased 28 percent to $1 billion from $784 million a year earlier.
Expenses grew 32 percent to $458 million compared with last year’s $347 million. The increased spending was due to e-commerce investments and overall headcount growth.
Footwear net revenues jumped 58 percent to $243 million, led once again by the Stephen Curry basketball shoes. “The Stephen Curry signature line has continued to drive strong momentum for the brand and our pinnacle football product, the Highlight Cleat, continues to lead the market,” said Under Armour chief executive officer Kevin Plank.
Gross margin for the second quarter was 47.7 percent versus last year’s 48.4 percent for the same period.
Looking ahead, Under Armour expects 2016 net revenues to be about $4.93 billion, which represents 24 percent growth, and operating income in the range of $440 million to $445 million. The Capital IQ estimate is for $4.96 billion in revenue.
The missed estimates in Under Armour’s forecast led to the stock dropping more than 5 percent in trading on Tuesday.