Software rollout contributed to Under Armour's 'disappointing' third quarter - Technical.ly Baltimore

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Nov. 1, 2017 10:53 am

Software rollout contributed to Under Armour’s ‘disappointing’ third quarter

Issues with a new platform in the company's supply chain led to delays, the company's leaders said Tuesday as they reported Under Armour's first sales dip in more than a decade.

The Under Armour booth at #CES2016 in Las Vegas.

(Photo by Twitter user @mindgrub)

Under Armour had more bad earnings news for the third quarter of 2017, as the company reported sales were down in a quarter for the first time since 2005. The 4.5-percent dip is the latest in a string of results this year that forced the company to lay off workers over the summer, and overall left CEO Kevin Plank and the company “incredibly disappointed,” Plank said on a conference call Tuesday. Bloomberg reported the struggles shaved $2.5 billion off Plank’s net worth (though he remains a billionaire).

According to the Washington Post, analysts have pointed to the company’s struggles on the retail side in the North American market, as well as shifting tastes and the bankruptcy of companies like the Sports Authority that were key distributors of the company’s products.

On the call, the company’s leaders also pointed to a software factor in the struggles. As first noted by ZDNet, UA implemented a new Enterprise Relationship Management system from SAP on July 1. It’s designed to unify “point of sale, warehouse management, inventory control, merchandising and product allocation systems in both North America and Europe,” said UA President and COO Patrik Frisk.

The system is designed to help Under Armour operate more efficiently. But getting the system integrated caused “disruption in our supply chain operations” during the quarter, he said.

“This led to delayed shipments and loss of productivity, which negatively impacted our third quarter results,” Frisk said, according to a transcript from Seeking Alpha. “During this system migration, we have encountered a number of change management issues impacting our workforce and manufacturing partners as they adapt to the new platform and processes.”

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It seems that the issues are less about the software itself, and more about equipping the people required to use it. Later in the call, CFO David Bergman said there were issues “working with our inventory partners, our vendors, trying to get them up and trained on the system as well and just getting all the things in place.”

Bergman said the system is up and stable, but the issues associated with the change will continue to have an impact into the fourth quarter results.

While it wasn’t the only issue, it echoed a theme from Plank that after the company’s fast rise, it is now dealing with “issues related to that growth.

Organizations: Under Armour
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VIEW COMMENTS
  • Rafael Coven

    I’m hard pressed to think of a major corporation that deployed SAP that didn’t miss earnings estimated due to deployment costs. When you have to change the organization to fit the software something is seriously wrong. In fact, I made a bunch of money in the 1990s and 2000-2010 by shorting companies undergoing enterprise-wide SAP deployments on the bet that the majority of them would miss earnings projections. Having lived through an implementation myself, and having talked to SAP consultants, and customers, it’s a wonder more people didn’t apply the same strategy I did.

    • I too have had miserable experiences with SAP. Every single company that I’ve seen implement the beast, has lost untold amounts of wealth just trying to patch the thing into existence. I think I’ll take your advice and research companies that SAP is courting.

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