Under Armour’s inventory management journey has been more protracted compared to its competitors in the apparel industry. As of the third quarter of the previous year, Under Armour’s inventory had increased by approximately 6% year-over-year. In contrast, Nike’s inventory decreased by 10%, and Lululemon’s by 4.5%, as reported by Telsey Advisory Group. Additionally, the inventory levels of several other apparel brands decreased by double-digit percentages.
During this period, Under Armour faced challenges with slower sales and high inventory levels, which led to significant discounting and impacted profit margins. The company made several executive changes in response, including in operations and supply chain management. Notably, Colin Browne left his position as COO in June, and Shawn Curran was later appointed as chief supply chain officer. Company executives have attributed these challenges to an overall market surplus of inventory. However, in a recent earnings call, Under Armour management expressed optimism about nearing a return to normal market conditions, despite the ongoing competitive pricing environment.
Under Armour, as a supplier to retailers, has been particularly affected by a prolonged period of subdued demand, causing both brands and suppliers to hold onto excess inventory longer than retailers, who adjusted their purchasing strategies more quickly. Retailers have maintained a cautious approach to inventory purchasing, impacting Under Armour’s wholesale sales significantly in the most recent quarter, according to the company’s CFO. This cautiousness among retailers aims to avoid the excess inventory issues experienced in the past two years.
Under Armour’s executives also mentioned that their suppliers have offered price concessions to assist the company in recovering its sales and profitability. With supply chain costs decreasing, the company is focusing on product costing initiatives with its vendors, expecting to see the financial benefits of these efforts in the current quarter and the following fiscal year starting in April.
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