Under Armour Tightening Inventory
It is a strategy certainly aimed more at its retail operations than on the team side of the business, but dealers will want to take note that Under Armour CEO and president Patrik Frisks recently told analysts that the company is "tightening" how it thinks about inventory. According to a report on the call by retaildive.com’s A.B. Brown, UA is opting for this approach, rather than trying to chase demand and possibly spread itself thin.
Fisk said the goal is to ensure that the right products are at the right places at the right time.
In the first quarter of 2021, this constrained-inventory strategy resulted in nine percent less inventory and higher margins. As executives anticipate increased freight expenses to continue, this becomes more important.
In its Dive Insight analysis of the strategy, Retaildive pointed out that for Under Armour, the strategy for weathering the supply chain complications of the pandemic has stayed the same for more than a year: control inventory. In other words, by managing how much inventory flows through its supply chain, Under Armour can better control how much product sits in its reserve, limit low-demand products and focus on getting the items that are in demand. The strategy has involved consolidating vendors and cutting SKUs.
Controlling inventory and simplifying its supply chain proved to boost margins in the past. And the better-than-expected margins for its Q1 2021 give hope that it can work going forward, too, Retaildive adds. The potential financial benefits to managing inventory may somewhat balance out with the freight increases expected due to transportation and logistics challenges.
Tight inventory management has translated into items selling faster and reducing returns, allowing for Under Armour to set prices that are more favorable, compared to relying on promotional sales to move inventory, Bergman said on the call.
The company's global e-commerce business was up 69 percent YoY, CFO David Bergman also said on the call.
Still, company leadership expects second quarter gross margins to decrease about 120 to 140 basis points in the second half of the year due to container-availability issues and port delays, but it said its supply chain is currently navigating the challenges "fairly well."