Two Quarter Earnings Report Fell 18%, Why Is Andemar So Watched?

On the road to recovery, Andemar (Under Armour, UA) suffered a setback after the two quarter earnings report: the intraday plunge 18%, finally closed at $24.08, and plunged 12.21%, which is the largest single day decline since the end of 2017. Within a day, the market value of Andrea has evaporated to nearly $1 billion 500 million, and its market value is now $10 billion 249 million.

As of 5 p.m. Beijing time on July 31st, the market value ranked seventh in the global sporting goods companies. The top six were Nike ($109 billion 163 million), Adidas ($635.66), VF group (35 billion 13 million US dollars), lululemon (24 billion 983 million US dollars), Anta (20 billion 292 million US dollars), Puma (10 billion 457 million US dollars). Once the world's third sports Brand Company's andmar, no longer, Anta's market value is nearly two times.

According to NPD group's tracking data, Andemar's share of the sportswear market in the United States dropped from 6.4% in June to 5.6% in July, which also declined compared with the same period last year. Matt Powell, senior analyst at NPD group, revealed that Andemar's market share dropped from 3.2% to 2.7% in sports shoes.

Neil Sanders Saunders, managing director of research firm GlobalData, said: "we hardly see consumers, especially female consumers, who have a substantial change in Andemar's view." (Neil)

The challenge for Andemar is that they want to grab the share of Nike, Adidas and lululemon rivals. It is more and more difficult for them to compete. The new brands such as the British net red fitness brand Gymshark, the American Outdoor Voice, Bandier and Gap Athleta are aggressive.

Powell said that now consumers are still strong in sports and leisure trends, they tend to buy sports and leisure products, he believes Andrew will be difficult to win further market share in the United States, "focus on fitness scene brand will face growth challenges." CNBC believes that the style of sportswear and sportswear is at that time - bright and patterned sportswear is the darling of people's wardrobe. This trend will not fade away in a short time.

CNBC said that if Andemar did not produce more attractive new products, it would never attract large numbers of consumers like Nike and Adidas.

Despite the problems of channel, debt, inventory and so on, for Andemar, the main problems may come from the background of this market. For Andemar, the adjustment of the channel may help, but more importantly, it faces the choice of brand orientation and product line layout. This is probably why they recently signed a popular artist Yang Chaoyue in China.

The biggest disappointment for investors came from the North American market. In the two quarter, sales in North America dropped 3.2% to $816 million in the same period. Analysts believe that the main reason is that it is struggling with the competition between its old rivals Nike, Adidas, and Champion and FILA, a new and popular revival sports and leisure brand. Consumers increasingly like to buy sportswear and sports shoes as casual clothes, while Andemar is the core gene of the brand with functional and high performance equipment.

In the first quarter of 2019, sales of North America in North America declined by 2.8%, contributing 843 million of revenue. At that time, officials said that sales growth in North America remained relatively stable throughout the year, and three months later, their outlook for North American business in the whole year turned "slightly down". This pessimism meant that there was no sign of recovery in the North American market for a short time.

Although sales in North America declined in the first quarter, their inventories and debts were significantly reduced, and investment and improvement in logistics centers and channel management showed a good trend. Nevertheless, the North American market did not show any improvement in the two quarter.

North America is Andemar's stronghold, accounting for over 70% of brand revenue. Kevin Planck, chairman and chief executive of Kevin Plank, made clear in May the importance of the North American market. "We must hit the North American market to win." In recent years, the already weak North American market is going to slide again, and there is no sign of improvement in the short term. This is undoubtedly a major blow.

Bloomberg's analysis is a direct question on the title, "do you still believe that Andemar can recover?"

In addition to North America, Andemar has many aspects of data that are improving.

On the whole, Andrew's global sales increased by 1.4% to $1 billion 192 million in the two quarter (excluding exchange rate growth by 3%), and net profit narrowed sharply from 95 million 520 thousand to 17 million 350 thousand. In the first half of 2019, Andrew global revenues amounted to US $2 billion 390 million. Compared with the net profit in the first half of last year, the loss was 126 million US dollars. In the first six months of this year, Andrea resumed its profit and had a net profit of 5 million 130 thousand dollars. Gross profit margin increased 1.7 percentage points to 46.5% in the two quarter.

Like the first quarter, Andrew was still reducing inventories and debts in the two quarter, and inventories dropped by 26% to $966 million in the first quarter, and total debt dropped by 24% to $591 million.

In the two quarter, Andrew's cash and cash equivalents increased by 131% compared to the same period last year, but they were down compared with 5 billion 574 million yuan at the end of 2018.

From the international market, the international business in the two quarter increased by 12% to 339 million US dollars (excluding exchange rate factor growth 17%) is currently 28% in the delta. Among them, the Asia Pacific region is still the most robust growth market, with an increase of 22.6%. In the two quarter, the Asia Pacific region continued to exceed US $145 million of EMEA in terms of US $154 million in revenue, maintaining the status of the second largest markets in the world.

In terms of business, in the two quarter, the income of the Darma garment decreased by 1.1% to 740 million US dollars; the footwear revenue increased by 5% to 284 million dollars; the revenue of accessories was stable and contributed 106 million dollars in sales.

In the two quarter, the wholesale revenue of Andrea declined by 1% to $707 million, while DTC (direct to consumer) revenue increased by 2% to $423 million, now accounting for 35% of the total brand revenue.

Andemar plans to double the e-commerce business in North America, and set up more independent andmar stores, hoping to promote its DTC business, further reduce the commodity of low discount channels, and communicate with consumers through more targeted marketing methods. However, they did not disclose specific measures.

For Andemar, if the fans who rely solely on the core of the brand, men who are hard core fitness enthusiasts, may not be able to achieve the recovery of their performance. They may need to explore a more feasible way in the face of the pressure of market and capital.

In this regard, in June this year, Andrew China announced the signing of Yang surpass may be their current situation, an attempt to expand the audience.

"Cooperation with Yang surpass, we hope to convey to consumers a message that Andrea is not only suitable for the most professional athletes, but also very suitable for sports enthusiasts' needs. When you decide to start exercising, you can try our products... Yang Chaoyue, as a girl student who likes sports, conveys our brand purpose to our female audience and young audiences. Mei Yuqing, managing director of Andrew China, explained in an interview with lazy bear sports.

Yang Chaoyue's products in Andemar's posters include bright green, which made him less fashionable in the past but more in line with young women's preferences. Lazy bear sports recently visited the Andrea store, and found that poster of Yang surpassed many obvious appearance in the store. Its "same product" is also the main promotion.

But judging from the sales volume of Tmall flagship store, it seems that there is no expected "take delivery" after signing the contract. The monthly sales volume of up to 300 is much smaller than that of the 9088 pairs of slippers sold by Andrew Ma, more than 3500 sports pants and sports vests.

At present, Yang Chaoyue, who has signed a contract like this, has not yet tried in North America, but also can see their caution. After all, focusing on functional and athletic performance is the core brand of Andrea. And how to attract more people on this basis is the next problem they will have to face.

Kevin Planck, chief executive of Andemar, said Andrew still focused on "long-term strategy".

Andrew predicts that the total revenue will grow by about 3%-4% in the 2019 year, and the business in North America is expected to decline slightly, while the growth of international business will remain between 10% and 15%. Despite today's crash, Andemar's stock price has risen by about 37% since 2019. In the second half of the year, the trend of the stock market will be more uncertain.