Under Armour posted better-than-expected earnings in the first quarter of 2017, but it wasn’t all good news.
The athletic wear brand posted its first-ever operating loss of $US2.3 million — or a penny a share.
The real trouble: nobody is buying Under Armour shoes.
Shoe sales — a key statistic for future growth for the company as it tries to morph into a lifestyle brand — have ground to a virtual halt, posting only a 2% increase in sales this year. That compares with 64% growth last year.
“We don’t like it, and we don’t accept it,” Under Armour CEO Kevin Plank told an analyst asking about the shoe revenue growth number on the earnings conference call.
A year ago, Under Armour’s future as a shoe powerhouse looked bright.
Its signature line with basketball hotshot Steph Curry was flying off shelves. But after the release of the Curry 3 last year, sales of Under Armour shoes softened drastically, and customer interest in basketball shoes started to fizzle.
Only time will tell if Under Armour can return its shoe business to the growth of a year ago, but it doesn’t bode well that such a young category for the company is already struggling.
Under Armour desperately needs a strong shoe business if wants to compete with its chief rivals and capture more of the lifestyle sportswear category. Under Armour’s shoe offerings focus on sport and function, but most shoe sales in the US are considered sports lifestyle sneakers — shoes like the Nike Air Force One or Adidas Stan Smith.
Though sales of cleats and running shoes remained solid for Under Armour last quarter according to Plank, those are specific shoes for specific consumers and represent a small share of the market compared to lifestyle.
Adidas and Nike’s shoe offerings are a much bigger overall percentage of sales for both companies when compared with Under Armour. The rivals both make their lifestyle shoes cornerstones of their brand, and their clothes and shoes are often worn by fashion icons and celebrities and seen on the covers of magazines.
Under Armour does not have the same cachet, and it isn’t viewed as “cool” by consumers in the same way. Even with its high-profile endorsements by Dwayne “The Rock” Johnson and basketball player Steph Curry, Under Armour barely registers on the scale.
Adidas and Nike know that a strong lifestyle shoe business is a key driver of interest in the rest of the lifestyle apparel line for consumers.
Plank gestured to products coming down the pike this year that he thinks will give Under Armour a foothold in this segment, but it remains to be seen what these new products will be and how customers will react to them.
One thing is for sure, though: the current sales growth doesn’t paint a rosy picture.
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