As Under Armour feels the pinch of slow merchandise sales in it's biggest geographic market — the United States — international sales growth has stood out as a bright spot for the struggling brand.
But one Wall Street analyst is raising concerns about the future of Under Armour's global growth.
Under Armour's international sales soared more than 46 percent in fiscal year 2017, while U.S. sales fell just over 5 percent. In the fourth quarter, weak U.S. demand led to a steep loss of $88 million.
In a report out Wednesday, Sam Poser, an analyst with Susquehanna Financial Group, said international sales could end up "heading down a similar path" as U.S. sales. He cited high levels of inventory and shrinking profit margins. Under Armour has defended those inventory levels, Poser noted, saying the brand is supporting its rapid growth outside the U.S.
"We continue to believe that the North American home market has a disproportionate impact on global brand perception," Poser said in the report. "It is clear to us, and most better retailers, that the Under Armour brand's standing has taken a blow in North America."
Poser and other analysts believe that is partly due to Under Armour's decision to sell in the moderate channel — retailers such as Kohl's — without clearly differentiating products from the more expensive but similar items sold in sporting goods stores such as Dick's.
"To a large extent, the reach of the Under Armour brand in North America has become increasingly limited to, as one industry executive put it, young kids and dads," Poser said. "There are certainly a lot of young kids and dads around the globe, but Under Armour's premium positioning (and pricing) is not sustainable, even against this target market, given improvements in products and execution from aggressive competitors such as Nike and Adidas."
Those rivals and others are making strides in getting products to consumers faster and introducing innovative ideas, he said.
Under Armour has said it is focused on rebounding. Founder and CEO Kevin Plank has said the brand is taking steps to become leaner, better manage inventory and improve profit margins, while becoming more responsive to consumers.
"In 2017, we were a loud company and a quiet brand," Plank said during a February conference call. This year, it will be "a quiet company and a loud brand."
Another investor report offers a more promising glimpse of potential for the footwear and apparel sector in general.
A Moody's report reviewed 26 U.S. brands, including Under Armour, Nike, and Ralph Lauren, and found the footwear and apparel sectors on the verge of a resurgence, Footwear News reported Thursday.
Moody's expects growth of 4 percent to 6 percent in the sector's operating profit over the next year and a half, lower than previously expected but better than 2017 and 2016, Footwear News said.
"The lower forecast reflects our expectation that most companies will reinvest for growth, tempering profit improvement as they continue to direct resources into direct-to-consumer channels such as new stores, websites and mobile applications, as well as marketing," the Moody's report said.