Under Armour CEO Stephanie Linnartz wants to win over more female consumers. And she plans to leverage shoes to do it.
“Footwear must also be part of the long-term equation to grow the women’s business,” Linnartz told analysts in a call discussing the company’s fourth quarter earnings on Tuesday. “We will go after women harder than this company has ever seen.”
Women’s product currently makes up less than one fourth of Under Armour’s revenues, said Linnartz, who became president and CEO of Under Armour in February. Footwear, which Linnartz described as Under Armour’s “single most significant growth opportunity,” is also an under-penetrated sector, representing 25% of annual revenues for Under Armour.
Both of these categories will work in tandem to realize an addressable market of new consumers, Linnartz said. This growth will start by repositioning and remarketing existing product in a fresh way. Eventually, Under Armour will introduce new products to the market.
“It’s not going to be done overnight,” Linnartz said.
Overall, adjusted earnings per share came in at 18 cents during the fourth quarter, 3 cents ahead of the 15 cents analysts projected on average, according to FactSet. Revenues rose 7.5 percent to $1.4 billion from $1.3 billion. The company offered lackluster guidance for this year as Linnartz lays out a plan to reshape the brand.
While Under Armour has historically been rooted in performance, executives also signaled a new focus on sneaker culture, or what founder Kevin Plank described as a shift from “footwear culture to a real sneaker culture.”
This will happen by emphasizing the brand’s image off the courts and fields and offering product that could potentially be seen on the feet of athletes in a tunnel walk. In this vein, Under Armour will also expand its sneaker collaboration offerings by bringing in “sneaker and branding experts” to help delve into this sector, Linnartz said.
“You will hear us talking a lot more about sneaker culture,” she added. This shift goes hand-in-hand with Under Armour’s renewed focus on its Sportstyle unit, which focuses on style and design in a more casual setting, à la athleisure.
“Footwear, women’s and Sportstyle are not mutually exclusive,” Linnartz said.
Tapping into sneaker culture has become a growing priority for other major footwear players of late. Foot Locker in March outlined a plan to tap into different classes of sneaker consumers — from sneaker mavens to deal seekers — by capitalizing on key sneaker moments and offering exclusive launches and collaborations.
Going all-in on Sportstyle and sneaker culture would help Under Armour expand its reach beyond the realm of perfomance, Williams Trading analyst Sam Poser wrote in a note to investors. However, these changes would likely not have an impact on results until Q4 of 2024, given the company’s 17-month long product development pipeline.
“While improvements at Under Armour are underway, there is still a long way to go,” Poser wrote. “Under Armour is entering into a sport lifestyle world that is controlled by Nike and to a lesser degree by Adidas and Puma.”
UA by the numbers
Linnartz started out with at least a small win during her first quarter at Under Armour Inc.
Adjusted earnings per share came in at 18 cents during the fourth quarter, 3 cents ahead of the 15 cents analysts projected on average, according to FactSet.
But Linnartz, the former Marriott International executive who joined the company as president and chief executive officer in February, also turned in lackluster guidance for this year as she starts to shape the brand anew.
“Fiscal 2024 will be a year of building for the brand,” Linnartz said in a statement. “I am prioritizing significantly amplifying global brand heat; delivering elevated design and products, with a focus on Sportstyle, footwear, and women, and positioning us to drive better sales growth in the United States.
“We will leverage our strong portfolio of franchises, including Heat Gear, Cold Gear, and compression apparel, to drive innovation across new products and markets,” Linnartz said. “We must deliver better for athletes and our customers and meaningfully increase returns for shareholders in the years ahead. My job is to make that vision a reality.”
Under Armour’s net income for the quarter received an $87 million boost from a tax valuation allowance and tallied $170.5 million, or 38 cents a share. This compared with losses of $59.6 million, or 13 cents, a year earlier.
Revenues for the three months ended March 31 rose 7.5 percent to $1.4 billion from $1.3 billion. Within that, wholesale revenues increased 10 percent to $909 million and direct to consumer sales rose 3 percent to $454 million.
For the full year, the company’s net profits increased 74 percent to $386.7 million as revenues increased 3.1 percent to $5.9 billion. Adjusted earnings per share came in at 58 cents, ahead of the 52 to 56 cent range the company projected.
This year, Under Armour is expecting its revenues to be flat to up slightly with diluted earnings per share of 47 cents to 51 cents.
Investors wanted a little more and welcomed Linnartz’s first quarterly report by sending shares down 4.2 percent to $7.49 in premarket trading on Wall Street.
BMO analyst Simeon Siegel said the company’s stock was under valued but that “the burden of proof lies with management execution.”