Earnings Up, but so are Concerns

In the midst of one of the worst economic downturns in the history of the United States, Under Armour posts a second quarter increase in net revenues overall, apparel net revenues, and net income.
Kevin Plank (the founder, Chairman, and CEO) noted, "We have a powerful brand that resonates with consumers, a growth platform with enormous long-term opportunity, and a strengthening balance sheet. In 2009, we will continue to make key investments in our growth drivers, increase the level of expertise of our team, and become better operators. An incredible path lies ahead for our brand, and through innovation and execution we will deliver our message of performance to athletes across the globe."
Click on the link to read the news release: http://www.uabiz.com/news/releasedetail.cfm?ReleaseID=399345
Although overall this is great news for investors of UA. There is one underlying potential cause for concern. UA introduced a new addition to their footwear division in January 2009. Footwear sales have substantially decreased in comparison to the second quarter of 2008. In the news release the company states that this was predicted. UA is finding that this market is unlike others in which it operates. Although it sees the same competitors as in the apparel industry the footwear industry is severely oversaturated and there might not be enough market share to cover the costs of this division. To remain on the cutting edge it is important for UA to remain deft and able to take advantage of other first mover advantages in the sporting goods industry. UA's footwear offers nothing new and innovative to the footwear industry which may be the downfall for this diversification.