Sports Authority has been a long-time Under Armour customer, but the company’s recent bankruptcy filing will have little effect on Under Armour’s business. Dick’s Sporting Goods, however, could win big.
Following Sports Authority’s Chapter 11 announcement, Under Armour said Friday that it’s reiterating its previous outlook for growth in 2016.
Net revenues are still expected to come in around $4.95 billion, up 25 percent over 2015, and operating income will be roughly $503 million, a 23 percent jump over last year—both in line with its most recent earnings release.
For the fourth quarter ended Dec. 31, Under Armour reported net revenues up 31 percent to $1.17 billion, and operating income up 21 percent to $178 million. For 2015 as a whole, net revenues were up 28 percent to $3.96 billion and operating income grew 15 percent to $409 million.
The company’s chairman and CEO Kevin Plank said at the time that core business is strong thanks to the “continued expansion in the breadth and depth of our brand.” Under Armour’s most recent quarter marked the 25th consecutive quarter where net revenue growth was north of 20 percent.
Under Armour said it will support Sports Authority through its restructuring.
“The company plans to offset the impact of the bankruptcy on the company’s full year 2016 results through continued sales to The Sports Authority and sales through other channels and customers,” Friday’s statement noted.
Sports Authority sought the bankruptcy protection to help it adjust its business for modern retail demands and to help pay down its estimated $643 million in debt. The company also said it would close 140 stores over the next three months, though more store closures could follow.
In its analysis of what Sports Authority’s store closures could mean for the athletic sector, Cowen and Company said Dick’s Sporting Goods—which has been rumored to be a potential buyer for the struggling company—will be the biggest share gainer in light of Sports Authority’s present state.
Sports Authority commands roughly 5 percent market share, according to Cowen, compared to Dick’s, which holds 16 percent. With Sports Authority’s store closures, Dick’s could recapture 20 – 35 percent of Sports Authority sales.
As of January, Cowen’s Consumer Tracker Survey found that 24 percent of consumers consider Dick’s their preferred place to buy sporting goods, followed by Walmart, Amazon and then Sports Authority.