Under Armour, the athletic apparel company that is growing into a digital sports company, had a tumble in its stocks after Sports Authority went bankrupt and closed its doors. The company had a loss of $52.6 million in its second quarter, because of the loss of Sports Authority’s business in selling Under Armour items.
Sports Authority went under for a number of reasons. Ten years ago it was the largest sporting good retailer, but since then it has struggled to keep up with competitors, like Dick’s Sporting Goods and Lululemon, and sites online competition like Amazon. When they went private in 2006 the main strategy was to achieve market dominance by having the most stores of all their competitors. But this strategy wasn’t sustainable because what was more important was good service and convenience, especially with the rise of online retail. The store was also in a lot of debt, 300 million in mezzanine loans, and over 93 million in loans from suppliers.
Despite the losses, Under Armour assured its investors and the public that they can bounce back from the gap that Sports Authority’s departure creates and this shouldn’t impact this year’s overall financial outlook. In their quarterly report, Under Armour called losses in revenue a “one-time impairment” and still has strong projections for the rest of 2016. The athletic apparel company is also looking to expand its digital fitness and their clothing sales have not been ruined by the closing of Sports Authority.
They have had a huge growth in their shoe sales with a 58% net growth, mostly because of the Steph Curry basketball shoe line. Under Armour’s apparel sales are also growing and so are their accessories. All sales of shoes, clothing, and accessories experienced growth this year, with new apparel revenues increasing 19% and accessories net revenues increasing 21%.
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Beyond retail, Under Armour is looking to continue its expansion with digital products like “smart shoes”, new clothing, wearables, and their new tracking and fitness system, the UA Healthbox. In January of this year they previewed the box and range of connected items that include a heart rate monitor, scale and and fitness tracker. This is the first of many fitness improvement products that Under Armour plans to release. In the below video they communicate that their ideas for the Healthbox go beyond just tracking sleep and heart rate. They want everything in your life to easily be connected and accessible, creating a single view for your health. Under Armour has a lot of opportunities ahead of them in digital fitness world and Sports Authority’s demise should simply be a minor bump in road that is soon forgotten.