The slumping sporting goods retail sector is taking a toll on brands. Feeling the pinch is Under Armour, which posted a quarterly sales decline of 5% on Tuesday, its first ever quarterly drop.
Under Armour's direct-to-consumer sales surged 15%, but results were dragged down by a 13% slide in wholesale sales to specialty sports and other retailers.
In a conference call on Tuesday, Chief Executive Kevin Plank noted the challenges faced by the retail sector, describing it as "pinned in a multi-year struggle to evolve past its legacy architecture.”
And he was not optimistic about change in the near future. “As we look to close out 2017, we do not expect these conditions to improve,” he said.
Under Armour isn’t alone. Larger rival Nike recently also reported declining North America fiscal Q1 wholesale revenue that led to flat companywide revenue growth. Meanwhile, in other sectors, toymakers Mattel and Hasbro have also been hurt by the bankruptcy filing of Toys “R” Us.
While bankruptcy filings of retailers from the Sports Authority to Gander Mountain have translated to promotional closeout sales that hurt demand at other retailers and forced other chains to cut their prices, the specialty retail sector is also grappling with the bigger issue of declining store traffic and increased online competition. Dick’s Sporting Goods, for instance, is beefing up its own ecommerce site and vows to be more price competitive. To diversify and put more control into their own hands, brands like Under Armour and Nike also are expanding their own online sales or striking new deals with retailers like Kohl’s for Under Armour and Amazon for Nike.
However, it’s not just struggling retail traffic and increased online competition that’s been hurting both Under Armour and Nike. The so-called athleisure trend has led retailers and fashion labels across the board to unveil their own style-oriented athletic collections, which appear to have crimped demand for performance-focused products.