Inventory Levels Up for Under Armour

Under Armour’s factory partners are returning to pre-pandemic production efficiency. Unfortunately, the company’s apparel inventory levels have also begun to rise, threatening to drive down its profit margin.

Under Armour is planning to work through slow-moving inventory by offering discounts and pack-and-hold seasonless apparel for next year.

Video Spotlight:  

• Why Under Armour CEO says supply chain issues are causing ‘less discounting’  (Sep 1, 2021, Yahoo Finance)
• Under Armour CEO: Inventory is a story, but we’re quite comfortable with how our inventory looks (Feb 8, 2023, CNBC Television)

This post is based on the Supply Chain Dive article, Under Armour’s inventory up 50% as supply chain loosens, by Ben Unglesbee, February 21, 2023, and the YouTube videos in the Spotlight. Image source: Shutterstock/Sorbis

Discussion Questions:

1. Explain why a rising inventory level is a concern for Under Armour.

Guidance: Under Armour derives its revenue from the sale of its apparel merchandise.  A rising inventory level means its merchandise is slow moving which means its demand is lower than its supply. A way to raise demand of its slow-moving inventory is to offer discounts.

2. Comment on Under Armour’s approach to inventory management.

Guidance: Under Armour uses a classification system to manage its inventory.  In this case, the way it manages slow-moving inventory is different from seasonless inventory. When inventories are up, discounts are offered for slow-moving inventory, whereas pack-and-hold is the category applied to seasonless apparel.