When it arrived on the retail scene, Under Armour (NYSE:UA) (NYSE:UAA) was the hottest name in athletics, the modern answer to older giants Nike and Adidas. Its technically advanced and up-to-date styles were a fresh concept in athletic apparel and footwear, and the company's sales soared.

Close to a decade after its creation, the magical two-digit growth started to decline, and the company has been scrambling to turn itself around and get back to its origins as a forward-thinking and breakout brand.

Person tying sneaker laces.

Image source: Getty Images.

Where did the company go wrong?

Two main issues have been plaguing the company this year:

  • Revenues have decreased due to falling North American sales. Growth began to slow to single digits in 2017, but it may have been going on since 2016. Potentially fraudulent accounting practices may have padded sales figures, leading to the second big problem the company is facing.
  • The company is being investigated for fraud. The Wall Street Journal published a report leaking the story that Under Armour is being probed by the federal government. Former executives noted that the company engaged in aggressively pushing retailers to sell more inventory closer to the end of a reporting quarter and pushing overstock meant for its own outlet stores toward other off-price retailers to make sales look greater.

The company is fighting the allegations and stating that it did nothing illegal, and experts confirm that these types of behaviors are in fact not uncommon.

Internationally, Under Armour's doing great

The issues that are causing the company so much heartache at home are not problematic internationally, where Under Armour is still enjoying solid growth.

Quarter

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Revenue

$1.4 B

$1.2 B

$1.2 B

$1.4 B

$1.4 B

North America growth

(4)%

(3)%

(3)%

(6)%

(2)%

International growth

5%

12%

12%

24%

15%

Data source: Under Armour quarterly reports.

International revenue made up 26% of the total in the third quarter of 2019, and keeping that segment growing is an exciting possibility. Retailers focused on international growth have the greatest opportunities in the global marketplace, and companies such as rivals Nike and Skechers are seeing greater returns from their worldwide transactions.

Can we expect Under Armour to bounce back?

Two matters need to fall into place before Under Armour can be considered a buy.

  • It needs to find its relevance in the North American market, where sagging sales indicate that the company is not meeting customer demands, through merchandise innovation and marketing.
  • It needs to find its footing in direct-to-consumer business, where Nike is succeeding and where customer attention is turning. Under Armour's direct business decreased 1% in the third quarter.

The company is still a powerhouse brand bringing in over $1 billion in revenue this quarter. With the consumer discretionary company's stock price at a low, some analysts are already suggesting that it's ready to take a turn for the better.

The intensity of the allegations is already dying down as the company sticks with its story that it did nothing against the law. With CEO Kevin Plank handing over the reins of the company to current president Patrik Frisk, the company is recognizing its limits and looking to change its ways.

Under Armour's stock price has been slowly increasing as the potential fraud becomes less of a story and investors see the bigger picture -- a large company with high sales and a successful product line struggling to use all its capabilities to propel itself into a better position. I wouldn't call it a buy just yet, but it's a high-potential company to monitor.