Jan 15, 2009
They say that hindsight is 20/20. Of course, they also say that an ounce of prevention is worth a pound of cure. Old sayings aside, I still have to wonder, “What was Under Armour thinking?”. Lets review, from May of 2008,
To make matters worse, Under Armour has already spent 37% of their entire 2007 advertising budget on commercials during the Super Bowl. That would be okay, except for that whole “recession” the country is mired in. Under Armour reported a 71% drop in first quarter profits (compared to Q1 of 2007) and lowered its predicted annual profits to $103.5-104.5M, down from its previous estimate of $108.5-110.5M.
As I mentioned in that article, I was a little concerned that Under Armour was breaking open the piggy bank in February, when they still had to advertise for the entire year (in retrospect, I actually don’t remember seeing any under armour commercials in the last year, although i’m sure they were out there). So now that the year is over, how did Under Armour do? The Baltimore Sun has the details,
Under Armour shares fell nearly 15 percent in midday trading after the Baltimore sports apparel company said today that it expected fourth-quarter earnings would be lower than expected because of the weak retail environment.
The company expects revenue of $179 million to $180 million and earnings per share of 16 cents to 18 cents per share for the quarter that ended Dec. 31.
For the year, Under Armour expects revenue of $725 million to $726 million, up 20 percent from 2007. Earlier this year the company said it expected revenue of $750 million to $765 million.
It expects income from operations of $76 million to $78 million for the year, a decline from $86.3 million in 2007. The company had previously expected 2008 income from operations of $97.5 million to $104.5 million.
Ouch. Obviously, Under Armour probably isn’t atypical of most companies during the current economic recession. But spending 40% of your 2007 advertising budget on one event, that occurred in February, was probably not the most fiscally sound financial move. But, then again, I don’t run Under Armour, and I’m assuming that at least part of their reasoning had to do with trying to take away some of the market share Nike possesses. But honestly…maybe the “New Deal” ideology isn’t the best move in the face of a recession?
Sports Business Digest – Nike to Under Armour: our Q1 losses are lower than your Q1 losses
Baltimore Sun: Under Armour shares drop 15% in midday trading
3 comments
I haven’t studied their marketing/spending very much, but I do know this. Just before Christmas I saw Under Armour ads on just about EVERY popular sports website. They were literally EVERYWHERE. It will be interesting to see if that was a one-time campaign or part of a larger strategy and if it is successful.
Yeah…it will be interesting to see what kind of numbers they have 1st quarter of 2009. Although I still expect them to be down, due to the recession, maybe the marketing campaign will be able to temper the storm a bit.
It is a thousand times better to have common sense without education than to have education without common sense.
Trackbacks