Under Armour's shoes aren't cool right now

CNBC Finance 2 weeks ago

Under Armour's third-quarter sales might have topped expectations, but one glaring shortcoming in Monday's release was the company's shoe sales.

Under Armour said footwear revenue tumbled 12% to $250.6 million from $284.9 million a year ago.

During a post-earnings conference call with analysts, the company admitted those results were "lower than planned." It said it still expects its footwear business will be up for the year. It said third-quarter shoe sales were hit, in part, because of fewer purchases through off-price channels, from which it has been actively trying to pull some products.

"I think this is part of the process we have had in the go-to-market [strategy] of truly setting up this funnel of technology and innovation..." CEO Kevin Plank said about Under Armour's footwear business. He called out its Curry and Rock products and its HOVR cushioning technology as bright spots. "Building product for [athletes] that will help them train, compete, and recover in is going to really be our difference, I think."

Still, the majority of shoppers appear to be voting differently with their wallets, as they're searching for shoes. And it shows.

Fashion-forward shoe brands like Fila, Puma, Athletic Propulsion Labs and Vans have been surging in popularity. Adidas and Nike have teamed up with the likes of singers Kanye West and Beyonce, and designer Virgil Abloh, to make more stylish sneakers, not necessarily meant to be worn during sports.

Instead, Under Armour has maintained its focus on "performance." And it's hurting the brand.

"For the last four years, every performance footwear category has been trending negatively ... running, basketball, training," NPD Group analyst Matt Powell said. "We are very much in an athleisure cycle today. Wearing athletic-inspired products but not intending to use them for sport."

It doesn't look like that's changing anytime soon, either, Powell said. "There is no indication in the near term that performance is coming back into fashion."

Plank on Monday's call spoke to what it was like to "adjust" from an apparel company to a business that also sells shoes. When Under Armour started in 1996, it was only selling sweat-wicking shirts. "The investment we have made [in footwear] is extraordinary, and we're now set to run," he said. "Frankly, [it has] taken us 15 years to get to this point."

Plank said to expect more innovation in the category moving forward. Time will tell if Under Armour can make its shoes cool again.

Under Armour shares were tumbling more than 14% on Monday morning, after the company confirmed Sunday it's facing a federal probe of its accounting practices. Nike's stock was up about 1.5%. Lululemon shares were falling 1.4%.


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