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Under Armour to focus on digital growth

Sportswear brand, Under Armour are to focus on digital growth after taking the decision to make cuts on operations allowing for the Baltimore-based firm to narrow their focus.

The highly popular food and drink tracking application MyFitnessPal has been sold for $345 million to private equity firm Francisco Partners. Thus, allowing Under Armour to narrow their focus on becoming “a performance brand” according to chief executive Patrik Frisk who believes there’s potential for growth following last week’s earnings report.

Originally, MyFitnessPal was created to help Under Armour connect with customers directly with the aim to boost sales, while analysing insights from fitness fanatics. Yet, customers who use the app no longer align with Under Armours’ target market hence the decision for the sale.

Last year, the app was reported to be worth US$136 million in revenue which merely amounted to 3 percent of Under Armours’ overall worth.

MapMyFitness app, another application owned by Under Armour, will continue to be in their portfolio as they believe the data analysed suits their goal of being ‘a performance brand”. However, products will be removed from between 2,000 – 3,000 wholesalers over the coming years as many similar brands adjust their growth strategies, focusing on direct selling instead.

Dave Bergman, chief financial officer has said, “We believe the critical mass of transformational changes are behind us”. Competitor Nike have made the decision to re-think their wholesaler network as well.

Additionally, the impact covid-19 has had on consumer behaviour and e-commerce needs to be considered, causing many brands and retailer to re-evaluate their current strategies.

“Wholesale remains crucial to our business, but as the broader retail landscape continues to evolve, so must we,” said CEO Patrik Frisk.

Under Armours’ global e-commerce sales have grew 50% compared to last year for the latest quarter. Yet, revenues are expected to fall in the late teens for the remainder of the year, which were forecasted to be as high as 25 percent earlier in the year.

From the third quarter, Under Armour have experienced a 23% growth in accessories totalling $US145 million, while experiencing a 6% fall in apparel sales totalling US$927 million. In addition to, a 19% increase in footwear revenue to US$299 million, totalling in US$1.43 billion in revenue, which has neither increased nor decreased compared to last year’s figures.

Under Armour shares have also increased 5% to US$14.59.

The impact of the global pandemic has had minimal effect on the operations of Under Armour as they predict sales to be “positive” going into the new year.

“The pandemic has given Under Armour, and many others, the permission to not grow revenues and instead focus on profits,” Says Simeon Siegael, BMO Capital Markets analyst.

Author: James Parker