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Under Armour in Trouble |
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Over the years, Under Armour was able to grow exponentially due to its ability to build an incredibly powerful brand in a relatively short time. Plank had employed breakthrough technology, celebrity endorsements, and appropriate product placement to establish the Under Armour brand in the athletic-apparel industry. In contrast to its competitors, the Under Armour brand proposition was always targeted at sports teams. By the early 2000s, the company continued to expand and was penetrating markets outside North America with its pioneering design to keep athletes cool, dry, and light throughout the course of a game, practice, or workout. |
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PayPal (11 USD)
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| In the early 2000s, a new trend started in the global performance apparel industry, wherein consumers started taking an interest in tracking their physical activity. Sensing an opportunity to enter a niche market by selling monitoring devices as well as by collecting the user’s personal data, sports apparel companies started investing intensely in wearable technology. According to market researcher NPD Group, between September 2015 and 2016, . |
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| While Under Armour was an incredible success story, Plank made the mistake of not patenting his ‘moisture wicking shirts’. By the early 2000s, competitors started imitating Under Armour’s products. Reebok’s ‘Play Dry’ and Nike’s ‘Pro Compression’ performance gear lines became very popular. Due to the greater economies of scale enjoyed by these big competitors, it became increasingly difficult for Under Armour to remain competitive. Realizing the importance of filing patents, the company applied for some patents for unique products and designs between 2012 and 2014, and expected to file more in the future. Moreover, Under Armour owned several trademarks. |
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| Analysts listed several factors for the poor results for Under Armour in the fourth quarter of 2016, which was a key holiday season. The company had been affected by the problems faced by brick-and-mortar retailers specializing in athletic wear. |
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| On August 1, 2017, Under Armour reported revenue of US$1.088 billion compared to a forecast of US$1.077 billion. Though the company reported a narrower-than-expected loss in the second quarter of 2017, it trimmed its sales forecast for the year. Under Armour expected to grow by 9 to 11% – lower than its previous forecast of 11 to 12%. The company also expected adjusted earnings for 2017 to be between 37 cents and 40 cents per share, compared to market expectations of 42 cents a share in 2017. |
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Exhibit I: UA’s Five-Year Key Financials
Exhibit II: Under Armour’s Sales Growth
Exhibit III: UA’s Net Revenue by Product Category
Exhibit IV: UA’s Net Revenue by Distribution
Exhibit V: UA’s Net Revenue by Market
Exhibit VI: Under Armour’s Market Share (2003-2010)
Exhibit VII: Under Armour’s Share Performance (August 2016-July 2017)
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