Under Armour’s Sneaker Problems, Explained By One Metric

On Tuesday, Under Armour reported a big miss on its 2016 Q4 earnings, and its stock plummeted 25% in response. But among the numbers were some bright spots, including footwear. Under Armour said its footwear revenue grew 36% in the quarter. But NPD Group, which tracks retail data and is a leading source of sneaker industry research, says Under Armour footwear sales declined 20% in the quarter. How do you reconcile those two numbers? The answer involves the difference between wholesale and retail. Under Armour’s number combines both—what Under Armour sold to retailers in bulk, and what actually sold to consumers at its own retail stores. NPD Group, which focuses on retail, is only measuring what gets sold at stores, one pair at a time. And that’s the more telling number. The disparity between wholesale and retail in this case shows that Under Armour sneakers slowed down at retail stores, and inventory built up—in other words, retailers were left with Under Armour shoes that didn’t sell. That will likely slow down sales in the near future as well. Make no mistake: Under Armour isn’t fudging the numbers. These companies are required by the SEC to report product sales in a two-system manner. But the 36% growth number is still misleading. It suggests Under Armour’s footwear business is healthy, when it isn’t. Read more at Yahoo Finance.