Under Armour was struggling before the coronavirus pandemic struck, but the forced closure of retail stores hit it hard. Unlike many other businesses, it wasn't able to effectively pivot to a direct-to-consumer (DTC) model, causing sales to tank further than they otherwise might.
There doesn't seem to be much hope of a quick turnaround for Under Armour, even if retailers are allowed to reopen, as is occurring in a number of states.
CEO Patrik Frisk told analysts on the earnings conference call that since mid-March, when COVID-19 was declared a pandemic, "about 80% of our global business has been at a standstill."
While that's not a surprise for its physical retail presence, what is surprising is Under Armour's inability to capitalize on its e-commerce channel, which it once described as one of its "largest long-term growth opportunities." DTC revenue tumbled 14% in the first quarter.
It also risks damaging its reputation with athletes. CFO Dave Bergman said Under Armour was renegotiating its contracts with them and in a number of cases, "we've been able to get some extended payment terms."
The company is looking toward the back half of 2020, and maybe into 2021, before it sees business normalizing. Investors aren't waiting around that long, and its stock is down almost 12% this week.