Under Armour lost close to $600 million in stock value Friday after athletic footwear retailer Foot Locker told analysts that sales of UA’s newest Stephen Curry basketball shoes are off to a slow start.
Foot Locker CEO Richard Johnson noted that signature basketball shoe sales are soft overall, although the two earlier Curry-branded shoes from UA continue to sell well, along with Nike's Kyrie Irving shoes and a range of running and streetwear shoes from other brands, including Puma and Vans.
ESPN said that it’s too early to tell if the Curry shoe is actually a failure, and that it’s unclear why this latest offering from the Golden State Warriors superstar hasn't sold as well as the first two iterations. One possibility is that the price is higher; the other is that, while Curry himself needs a higher shoe profile to protect his ankle during NBA games, non-athlete shoppers prefer lower-profile shoes as streetwear.
While Under Armour has chipped away at Nike's lead in the U.S. sports apparel market, it remains in a precarious position. Just last month, NPD Group had Adidas reclaiming its spot as the number two U.S. sports brand, sending UA back to third place. Moreover, Nike can shrug off a poor start or even a poor showing of a particular shoe design far more easily than UA can.
While Foot Locker CEO Johnson’s remarks gave UA’s investors some serious jitters, he hasn’t written off the new Curry shoe by any means. “I think Under Armour is doing a great job investing in their footwear business,” Johnson said. “As I talked about, the 2.0 and 2.5 Curry shoes in third quarter performed well. The 3.0 is fairly new into the business. It started off a bit slower than the two previous models but, again, it's early days.”
ESPN's speculation about the design of Curry’s new shoe is intriguing, and could be a reflection of consumers’ increasing desire to wear styles more geared to the street than the sports arena. Adidas, for example, has staked much of its comeback on streetwear, ramping up its partnership with athletes as well as creatives: For example, the retailer announced in June that it is expanding its relationship with music and fashion icon Kanye West, developing “a Yeezy-branded entity creating footwear, apparel and accessories for all genders across street and sport.”
Under Armour reported third quarter earnings last month, mostly beating expectations: Net income increased 28% to $128.2 million, up from $100 million in Q3 last year, and Q3 diluted earnings were 29 cents per share, up from 23 cents per share a year ago and beating FactSet analyst expectations of Q3 adjusted earnings of 25 cents per share. But its stock fell on tempered growth forecasts: Experts say retail partner Sports Authority’s bankruptcy likely took a toll in the third quarter, and there also are indications that UA must step up in categories like women’s gear and footwear.