Under Armour’s (NYSE:UA) (NYSE:UAA) stock was cut in half this year, as the COVID-19 crisis exacerbated its ongoing declines in its main North American market. The athletic footwear and apparel maker had already been struggling with tough competition, tariffs, regulatory probes regarding its accounting practices, and abrupt management changes — but the pandemic amplified all those problems.
UA’s revenue rose just 4% in 2018 and 1% in 2019. After the COVID-19 crisis hit, UA’s revenue declined 23% annually in the first quarter of 2020, then plunged another 41% in the second quarter. It posted steep losses during both quarters.
UA didn’t offer any guidance for the second half of the year, but it expects to offload a “critical mass of sales to the off-price channel,” which will reduce its inventories but crush its gross margins. For the full year, analysts expect its revenue to decline 26% and for its earnings to stay in the red.
In other words, UA’s stock probably won’t rebound any time soon. Therefore, investors should forget about UA and take a closer look at its bigger rival Adidas (OTC:ADDY.Y) — which could recover at a much faster rate over the next few quarters.
Adidas is beating Under Armour in North America
Under Armour’s revenue from North America, which accounted for 69% of its top line, declined 2% in 2019. It’s been struggling in this core market for years, due to poorly received designs, competition from Adidas and Nike (NYSE:NKE), and heavy promotions, which eroded its brand and margins.