Under Armour (Class A) UAA Business Risk Report

Risk Report Outline for Under Armour (Class A) – Ticker: UAA

I. Market Risks

A. Competition in the Athletic Apparel Industry

Under Armour operates in a highly competitive market dominated by established companies such as Nike and Adidas. These competitors have larger financial, marketing and technological resources, which could potentially impede Under Armour’s market share and growth potential.

B. Fluctuations in Consumer Preferences and Trends

The athletic apparel industry is notably sensitive to changes in consumer preferences and lifestyle trends. Under Armour’s performance can be affected if it fails to rapidly adapt to changing trends such as the increasing demand for sustainable and ethically produced apparel.

II. Operational Risks

A. Supply Chain Disruptions

Under Armour’s operations could be compromised by disruptions in its global supply chain, caused by unforeseen events such as natural disasters, pandemics, or political instability in countries from which it sources materials or manufactures products.

B. Manufacturing Delays and Quality Control Issues

Under Armour has occasionally encountered delays in manufacturing and inconsistent product quality, which can tarnish its brand reputation and customer loyalty. Ensuring quality while keeping up with production demands remains a critical challenge for the company.

III. Financial Risks

A. Currency Exchange Rate Fluctuations

As a global retailer, Under Armour is exposed to risks associated with currency exchange rate fluctuations. This can negatively impact its financial results, as the company must convert foreign currency revenues into U.S. dollars for reporting purposes.

B. Cash Flow Volatility

Under Armour has experienced volatility in its cash flow due to seasonal fluctuations in sales and the unstable demand in the global apparel market. This hampers its ability to plan long-term investments and maintain steady business operations.

IV. Regulatory and Compliance Risks

A. Changes in Trade Policies and Tariffs

The increasing unpredictability in global trade policies, including tariffs and trade barriers, can significantly impact Under Armour’s cost structures and supply chains. Potential changes in U.S. trade policies could impose new tariffs on imported goods, affecting pricing and profitability.

B. Data Security and Privacy Regulations

As Under Armour expands its digital footprint, it becomes increasingly susceptible to risks related to data security and compliance with evolving privacy regulations worldwide. These include regulations such as GDPR in Europe, which impose strict data protection obligations on companies.

Mitigation Strategies

A. Diversification of Product Portfolio and Market Expansion

Under Armour is actively diversifying its product portfolio and tapping into new geographical markets to mitigate the risks associated with economic fluctuations and competitive pressures in its core markets.

B. Enhanced Monitoring and Relationship Management with Suppliers

To minimize operational risks such as supply chain disruptions, Under Armour has heightened its monitoring and relationship management practices to ensure timely and quality production from its suppliers.

C. Hedging Strategies to Mitigate Currency Risks

Under Armour employs various financial instruments, including hedging strategies, to mitigate the adverse effects of currency fluctuation risks. Through these financial instruments, the company aims to stabilize its revenue streams across different markets.

D. Regular Compliance Audits and Data Security Assessments

Under Armour conducts regular compliance audits and security assessments to ensure adherence to international trade, data protection, and privacy laws, thus safeguarding against potential legal and regulatory penalties.