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Underarmour Domestic Forecast Loss As Global Expansion Costs Weigh

Under Armour has remained stagnant in their global strategy presence. They are spending more and more to establish themselves a global dominant compared to Nike and adidas but the money has not helped their cause. As their domestic market growth cools down, their international presence seems to do the same. Under Armour is choosing to target China as their main got o for international presence. Domestically, UA has intense competition with Nike and Adidas and what also doesn’t help is the bankruptcies from the smaller sporting goods stores that reduce UA’s sales. In order to win and captive more of an audience, UA is preparing to utilize celebrity branding like Dwayne “the rock” Johnson. These efforts are to create more of a brand image. The CEO wants to create UA as a quite company but a loud brand that everyone can relate to and recognize. Under Armour’s international sales rose 27 percent in the three months ended March 31, making up for flat sales at the North America division that is responsible for 73 percent of overall revenue. Under Armour’s loss widened to $30.2 million in the first quarter, hurt largely by restructuring costs.

Unlike many competitors, UA has barely improved its international reach in recent years. While Nike and Adidas look for a balance between their domestic and international businesses, Under Armour has focused on its North American business to try to gain significant market share. This strategy worked for the company early on, but the company's reliance on the North America market has been an issue of late as the North American apparel market hit a slump. UA is fully dependent on their international sales but even their international sales has taken a minor hit as well due to the rise of competition and also the loss of sporting goods stores that housed most of UA’s supply chain. However, Under Armour's international revenues have seen a consistent rise over the last few quarters. In Q3 2017, the company recorded an impressive 35% year-on-year increase in revenues from outside the U.S.

Specifically, in China, UA is seeing a lot of this overall growth. As recognized by both Nike and Adidas, Greater China is expected to be a heavy growth market for sports apparel companies. Under Armour believes that the Chinese market could hold the potential to become a billion dollar plus market. UA has to strategically figure out a way to gain more new consumers and maintain their current consumers buy tapping into the Chinese market. They have to differentiate themselves from the other competitors. They can only use the endorsements of celebrities so many times. There has to be other ways of gaining more of an audience. In keeping up with its strategy to target emerging economies, the company debuted in India by launching its brand on Amazon Fashion earlier this year. At present, through its dedicated Amazon store, Under Armour sells more than 330 styles of clothing and footwear in the country. Like China, sportswear is a high growth market in India.

UA needs to really push its presence significantly outside the U.S. and Canada in the coming years. Entering new markets and expanding existing ones will not only enable the company to benefit from overall growth in these markets but will also help in diversifying its concentration and risk significantly. This will allow UA to surpass Nike and Adidas domestically and also internationally.

https://www.reuters.com/article/us-apple-stock/apple-and-buffett-saw-value-and-acted-idUSKBN1I70DW

https://www.forbes.com/sites/greatspeculations/2017/12/01/a-look-at-under-armours-international-presence/#21a1d069744c

https://www.nasdaq.com/article/what-under-armour-will-focus-on-going-forward-international-business-part-2-cm876597