With Under Armour set to announce first quarter financial results Tuesday, one consumer analyst is questioning the Baltimore brand's creative direction and new product pipeline.
Wall Street analysts expect the sports apparel and footwear maker to post a loss of 5 cents per share and have no change in sales compared with the first three months of 2017, when years of rapid growth ground to a halt amid more intense competition and a slowdown in the U.S. apparel market.
The brand likely will face pressure on profit margin for the rest of the year, especially as it looks to clear excess inventory through off-price channels such as TJ Maxx, said Camilo Lyon, an analyst with Canaccord Genuity, in a report Monday.
Lyon also raised concerns about the brand's leadership, noting recent departures in the executive ranks, including Peter Ruppe, head of footwear, and Karl-Heinz "Charlie" Maurath, chief revenue officer.
"What's of greater concern to us is the lack of creative direction at the company," Lyon said. "While there is high hope and expectation that COO Patrik Frisk is making the right moves to improve the efficiency of the company's business operations, we see no one at the company driving the creative vision on product design."
Lyon said the designer behind the brand's popular Curry 4 basketball shoe, NBA star Stephen Curry's signature line, has moved to Nike.
It appears, from talks with factory and retail contacts, that "there is virtually no new innovation on the horizon that could potentially stem the declines" in U.S. sales, Lyon said. The soonest consumers could expect to see products currently in the design phase would be fall 2019.
"We point this out to illustrate just how long it will likely take for [Under Armour] to return to growth in [North American] wholesale," Lyon said.
Under Armour's biggest rivals, Nike — which also has seen U.S. revenue declines — and Adidas, have been better positioned financially to survive a market share battle, Seeking Alpha contributor Brian Gilmartin said in an analysis of the brand posted Sunday.
"Nike went through this same kind of 'rapid-growth-to-no-growth' situation in the late 1990s when the stock fell precipitously, and it took three to four years for Nike to make the necessary changes to deliver what has been incredible out-performance in the stock price since the middle of last decade," Gilmartin said.