Under Armour Inc.’s direct-to-consumer sales and overall revenue each jumped about 28% in the second quarter, but the sporting goods apparel maker says it is feeling the impact of Sports Authority Inc.’s liquidation.
Under Armour’s direct-to-consumer sales, which primarily are e-commerce sales, totaled $321 million for the quarter, up 27.9% from $251 million in the year-ago period. Those sales represent about 32% of total Q2 revenue. Total revenue for the quarter was $1 billion, up 27.6% from $783.6 million for the second quarter in 2015.
While sales increased, the sporting goods apparel maker, ranked No. 100 in the Internet Retailer 2016 Top 500 Guide, reported net income of $6.3 million in the quarter compared with $14.8 million a year earlier. The decline in profit primarily was attributable to Sports Authority’s liquidation, Chip Molloy, Under Armour’s chief financial officer, told investors in an earnings call, according to a Seeking Alpha transcript. Sports Authority (No. 287 in the 2016 Top 500 Guide)—a large seller of Under Armour apparel and equipment—filed for bankruptcy in March.
Selling, general and administrative expenses for Under Armour increased 32% to $458 million compared with $347 million in Q2 2015, which Under Armour attributes to Sports Authority’s store closings and investments in its direct-to-consumer business.
Under Armour also announced in the call that it will start selling its products at Kohl’s Corp. (No. 22 in the Top 500) stores in 2017. This move will help Under Armour get its product in front of Kohl’s large and loyal customer base, which consists predominantly of women, CEO Kevin Plank said.
Under Armour’s mobile apps and wearable products are included it its Connected Fitness program, which has more than 175 million registered users, up 9.4% from 160 million users in Q1, Plank told analysts on the earnings call. About 100,000 new users sign up for Connected Fitness every day, he said. Connected Fitness revenue was $23.5 million in Q2, up 72.8% from $13.6 million in Q2 2015.
Connected Fitness consists of several health-tracking wearable devices and four fitness apps: Under Armour’s fitness recording app Record, personal training app Endomondo, weight loss coaching app MyFitnessPal and exercise tracking app MapMyFitness.
In June, Under Armour unveiled another app, but this one has a pure shopping focus. The UA Shop app is available only on iOS but will be available for Android devices soon, the retailer says. The app is part of the Connected Fitness platform, which allows consumers to sync their UA fitness tracking apps to the new shopping app. As a result, consumer data from the fitness tracking apps will help the retailer recommend products to consumers using the UA Shop app. For example, a consumer who logs frequent runs in a warm climate will be offered a different product than a consumer who records frequent hikes in cooler climates.
“We believe this will help drive more frequent shopping, bigger baskets and better conversion throughout the platform,” Plank said.
For the second quarter ended June 30, Under Armour reported:
- Revenue of $1.0 billion, up 27.6% from $783.6 million last year.
- North America revenue of $827.1 million, up 21.5% from $680.8 million.
- Net income of $6.3 million compared with $14.8 million in the second quarter of 2015..
For the first half, Under Armour reported:
- Revenue of $2.05 billion, up 28.9% from $1.59 billion last year.
- North America revenue of $1.71 billion, up 23.9% from $1.38 billion.
- Net income of $25.5 million, down 3.8% from $26.5 million.