Under Armour Forecasts Sales Declines In 2020

As it experiences strong competition from Lululemon and Nike, Under Armour is predicting a sales drop this year as it grapples with bringing customers to its training sneakers and shirts that wick sweat. The sportswear company also said it could see an impact of as high as $60 million in lost sales from the coronavirus in Q1 of fiscal 2020, CNBC reported.

Under Armour has been having challenges with growing sales for the past couple of years. After over 20 years of quarterly revenue growth above 20 percent, the company registered its first quarterly loss in 2017. The company has competition from Adidas, Lululemon and Nike in the United States. Those brands have reportedly made workout gear that is more fashionable, but Under Armour has remained focused on performance. 

The sportswear brand also is more dependent on wholesale partners like Kohl’s. Competitors of Under Armour like Lululemon and Nike have been going around middlemen by selling to shoppers directly as much as they can. Under Armour’s shares recently fell over 17 percent following the company’s less-than-expected Q4 sales.

Under Armour reported revenue of $1.44 billion and adjusted earnings per share of 10 cents. Analysts had forecast $1.47 billion and 10 cents per a Refinitiv poll.

In separate news, Cowen believes Lululemon could be the next Nike, as it raised its price target on the stock to $250 per news in December. Analyst John Kernan said in a note to clients on Dec. 3, “Assuming LULU can sustain an NKE-like free cash flow multiple, we see a path to a $40 billion market cap. We view LULU growth, durability and ROIC [return on invested capital] profile as most similar to NKE.”

Lululemon’s market cap was at $29 billion per a report at the time in comparison to Nike’s at $146 billion. However, the expanding international and menswear divisions of Lululemon will bolster sales. Its new streetwear-inspired Lab line, as well as new self-care and footwear lines, are forecast to bring in new shoppers.