Under Armour Gets Kohl's Account -- WSJ
July 27 2016 - 3:04AM
Dow Jones News
By Sara Germano
Under Armour Inc. is trying to break out of sporting goods, and
hopes a new casual-wear line and an expansion into midtier
department stores will do the trick.
The Baltimore-based company said Tuesday it will begin selling
its products in Kohl's Corp. stores beginning next year, giving
Under Armour a significant new wholesale account that will help
expand sales beyond its traditional customer base in core athletic
stores like Dick's Sporting Goods Inc.
But despite posting 28% revenue growth to $1 billion for the
recent quarter, the sportswear maker reported lower gross margins,
weighed down by rising costs and the liquidation of Sports
Authority. Its marketing expenses rose 20% and selling, general and
administrative costs increased 32%. Executives said that gross
margin will be down slightly this year compared to last year.
Shares of the company, down 0.7% so far this year, closed
Tuesday down 5.1%.
The move to open sales at Kohl's, which will begin early next
year in about 600 of their existing retail locations, accompanies
Under Armour's expected September rollout of a casual-wear line of
fashion-oriented shirts and shoes, dubbed Under Armour
Sportswear.
Both strategies are aimed at bringing in new and different
customers, Chief Executive Kevin Plank said on the company's
second-quarter earnings call. Under Armour reported double-digit
sales growth in each of its apparel, footwear, and accessories
segments for the period, but the company is still dwarfed in
overall revenue by larger rivals Nike Inc. and Adidas AG, which
have larger distribution footprints and casual-wear offerings
around the world.
Under Armour, like its larger rivals, already sells performance
athletic gear to some department stores including Macy's Inc. and
Lord & Taylor. Both Nike and Adidas have existing sales
accounts at Kohl's.
One challenge for Under Armour will be making sure it has enough
differentiated product for Kohl's, so it isn't cannibalizing its
own sales at sporting goods retailers. Mr. Plank said plans to
expand to Kohl's have been in the works for years and the company
has spent much of that time working on merchandising for the
rollout.
Mr. Plank also said the company will launch a New York City
flagship retail store at the former FAO Schwarz building on Fifth
Avenue, beginning around 2019. The location is considered one of
the most expensive commercial real estate properties in the city,
though the price of Under Armour's leasing agreement weren't
immediately known.
The company reported a loss of $52.7 million, compared with a
year-earlier profit of $14.8 million, hurt by a impairment charge
related to the liquidation of Sports Authority and a dividend
payout to Class C shareholders.
The company backed its 2016 revenue forecast -- which it had
lowered in May -- for $4.93 billion. The Baltimore-based company
has benefited from the success of its endorsed athletes. In the
quarter reported Tuesday, its Stephen Curry basketball line helped
footwear sales surge 58% to $242.7 million from a year earlier.
But gross margin slipped to 47.7% from 48.4% a year ago.
Apparel sales, meanwhile, climbed 19% to $613 million, again led
by growth in training and golf. Accessories sales rose 21% to $101
million, driven mostly by headwear and bags. And while more than
three-quarters of the company's revenue is North America-based,
foreign revenue increased 68%.
--Anne Steele contributed to this article.
Corrections & Amplifications: Under Armour's results
included a previously reported $23 million impairment charge. An
earlier version of this article incorrectly stated that the company
had a prior-year impairment charge of $32 million. An earlier
version of the story also misstated the company's stock performance
this year. As of Tuesday's close, the stock is down 0.7% this
year.
Write to Sara Germano at sara.germano@wsj.com
(END) Dow Jones Newswires
July 27, 2016 02:49 ET (06:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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