Under Armour (Class C) UA Business Risk Report

I. Market Risks

A. Competition from global sports apparel brands

Under Armour faces intense competition from established global sports apparel brands such as Nike, Adidas, and Puma. These companies have significant market share and brand recognition, which challenge Under Armour’s growth and branding strategies.

B. Shifts in consumer preferences and trends

Consumer preferences in the sports apparel industry can change rapidly, influenced by fashion trends, health trends, and technology. Under Armour must continually adapt its product offerings to align with these evolving preferences to retain and grow its customer base.

II. Operational Risks

A. Supply chain disruptions

Under Armour’s operations are susceptible to disruptions in the global supply chain, which can be caused by factors such as natural disasters, global pandemics, or political instability in countries where production facilities are located.

B. Quality control issues

Maintaining consistently high quality across all product lines is crucial for Under Armour. Failure in quality control can lead to customer dissatisfaction, returns, and damage to the brand’s reputation.

III. Financial Risks

A. Fluctuations in foreign exchange rates

As a global retailer, Under Armour faces foreign exchange risk, which could affect profitability, especially given the volatility in global currency markets. The company must manage this risk to protect its overseas earnings.

B. Dependence on key retailers for a significant portion of sales

A significant portion of Under Armour’s revenue comes from a few key retailers. Changes in the business practices or financial health of these retailers could adversely affect the company’s sales and financial condition.

IV. Legal and Compliance Risks

A. Intellectual property disputes

Under Armour, as an innovator in sports apparel, often faces risks associated with intellectual property disputes. Protecting proprietary designs and technologies from infringement is crucial to maintaining competitive advantage.

B. Non-compliance with labor regulations

With manufacturing facilities around the world, Under Armour must adhere to diverse labor regulations. Non-compliance with these laws can lead to legal penalties and harm the company’s reputation.

V. Strategic Risks

A. Failure to innovate and keep up with technological advancements

The inability to keep pace with technological advancements and innovate could lead Under Armour to fall behind its competitors. Continual investment in research and development is necessary to stay at the forefront of the sports apparel industry.

B. Expansion into new markets and potential regulatory challenges

While expansion into new markets offers growth opportunities for Under Armour, it also comes with regulatory challenges and cultural differences that could affect business operations.

VI. Mitigation Strategies

A. Market Risks:

Under Armour engages in continuous market analysis and competitor assessments to stay agile in a highly competitive market. Additionally, diversifying the product portfolio to include a wider range of sports apparel and accessories helps mitigate risks associated with shifts in consumer preferences.

B. Operational Risks:

To manage supply chain risks, Under Armour is establishing strong relationships with alternative suppliers. Moreover, implementing rigorous quality control protocols ensures product quality and customer satisfaction.

C. Financial Risks:

The company employs hedging strategies to manage exposure to foreign exchange fluctuations. Diversifying sales channels serves to reduce reliance on key retailers, spreading sales revenue risks.

D. Legal and Compliance Risks:

Under Armour conducts regular audits and compliance checks to ensure adherence to international labor laws and regulations. The legal team actively manages potential risks with oversight and proactive strategies.

E. Strategic Risks:

Investment in research and development remains a pivotal part of the strategy to foster continuous innovation. In addition, conducting thorough market research prior to entering new markets ensures informed decision-making and strategic alignment.