Under Armour Inc.’s direct-to-consumer revenue, which includes e-commerce sales, was one of the few bright spots in the brand manufacturer’s otherwise disappointing third quarter.
Under Armour’s direct-to-consumer revenue grew 14.7% year over year to $468 million for the third quarter ended Sept. 30 from $408 million in Q3 2016, and represented 33% of its global revenue in the quarter, the company reported this week. Direct-to-consumer revenue comes from Under Armour’s e-commerce sales and revenue from its 280 stores, which include 210 factory outlets and 70 branded retail stores. The retailer does not break out e-commerce sales.
Total revenue decreased 4.1% in the quarter to $1.41 billion from $1.47 billion in the year-ago period.
North American sales, Under Armour’s largest segment, decreased 12.2% year over year to $1.08 billion from $1.23 billion.
The retailer points to its struggling wholesale business, which has been tough since 2016’s fourth quarter, CEO Kevin Plank told investors, according to a transcript from Seeking Alpha. He cited changes in the retail landscape, including bankruptcies and store closures, such as Sports Authority, as well as “declining productivity, traffic and shifting fashion preferences has contributed to what has now been more than a year-long promotional environment.”
“As we look to close out 2017, we do not expect these conditions to improve,” Plank said. “And although it’s too early for us to provide an outlook for fiscal 2018, our initial assumptions anticipate continued strength across our international and direct-to-consumer businesses, contrasting with a difficult environment in our North American wholesale business well into next year.”
The retailer also said it had a supply chain disruption when it launched an integrated enterprise resource planning system on July 1. The new ERP system, which includes its point-of-sale, warehouse management, inventory control, merchandising and product allocation systems in North America and Europe, will enhance productivity in the long term, however it had a negative impact on third quarter results because of delayed shipments and loss of productivity, said Patrik Frisk, president and chief operating officer.
International sales, however, have exceeded expectations, and international revenue increased 35% in the quarter to reach $305 million. Under Armour also plans to expand its e-commerce business deeper into Europe, Frisk said, though he did not detail those plans.
“We’re protecting and prioritizing international expansion, e-commerce development, footwear design development, areas like that, while we continue to dig in deep and kind of right-size the cost structure,” chief financial officer David Bergman said.
Under Armour is No. 36 in the Internet Retailer 2017 Top 500.
For the third quarter ended Sept. 30, Under Armour also reported:
- $1.41 billion in net revenue, a 4.1% decrease from $1.47 billion in Q3 2016.
- North American revenue of $1.08 billion, a 12.2% decrease from $1.23 billion.
- Net income of $54.2 million compared with $128.2 million.
- Connected Fitness revenue of $23.4 million, a 15.8% increase from $20.2 million.
For the first nine months, the company reported:
- $3.61 billion in net revenue, a 2.6% increase from $3.52 billion the first nine months of 2016.
- North American revenue of $2.78 billion, a 5.1% decrease from $2.93 billion.
- Net income of $39.7 million compared with a $153.8 million.
- Connected Fitness revenue of $65.3 million, a 5.0% increase from $62.2 million.