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Under Armour CEO: 'We are literally changing the tires while driving'

Sportswear and apparel brand Under Armour (UAA) seems to be at a crossroads. The company reported mixed Q2 earnings on July 20. While its revenue increased by 2% to $1.19 billion — revenue in its home turf of North America fell 3%. It’s a step backward compared to its competitors in the athletic apparel space. North American revenues for Nike (NKE), Adidas (ADDYY) and Lululemon (LULU) rose 7%, 3%, and 18%, respectively, in their most recent earnings reports.

"Within North America, however, stronger wholesale expectations, combined with softer direct-to-consumer demand, translates to an updated view with the full year, where we now expect revenue to be down slightly,” said Patrik Frisk president and COO of Under Armour’s North American Business Division, in the company’s earnings call.

OAKLAND, CA - JULY 17: Matt Olson #28 of the Oakland Athletics stand in the dugout wearing Under Armour batting gloves (Photo by Thearon W. Henderson/Getty Images)

CEO and chairman Kevin Plank noted that the company is rewiring — “literally changing tires while we're driving,” he said. But as a result, Plank said that Under Armour will be a “much quieter company and a much louder brand.” What that entails will remain to be seen.

America's athleisure obsession

One thing that seems to separate Under Armour from its rivals is its inability to make a more significant shift into the athleisure market. Over the past few years, American consumers have embraced the athleisure aesthetic. While Nike, Adidas, and Lululemon have all embraced the athleisure trend, Under Armour's lineup still skews heavily on the performance category.

"The marketplace is purely focused on athleisure right now and not on performance wear … and while there are brands who were thriving in the performance market … for the most part, brands that are focused on performance are underperforming the rest of the market," NPD Group vice president and senior industry advisor Matt Powell told Yahoo Finance.

Graphic: David Foster/Yahoo Finance

Though Under Armour has an array of competitors, Nike is far and above the biggest with an industry-leading $39.1 billion in revenue. Currently, Nike's top 5 selling items for men have an average retail price $146 in comparison to Under Armour's $79. The gap widens when it comes to women's apparel and footwear. The average retail price of Nike's top 5 selling items in that category is $174 when compared to Under Armour's $43. Under Armour fairs better than Adidas and Lululemon by the same metric, but both companies have been able to tap into the athleisure with relative ease.

A New Hope?

The forecast isn't all bad for Under Armour. The company has seen improvement in some areas, such as international sales, which rose 12%. Frisk pointed to the advancements made in the HOVR running shoe line for the improvement.

According to Cowen Equity Research's “Sneaker and Athlete Beat Vol IV,” among the six Under Armour sneakers for men placing in the top 20, five were priced above $100, led by Dwayne "The Rock" Johnson's Project Rock 2 training shoe. That was followed by several HOVR styles and the Curry 6. All three sneakers among the top sellers for women were priced above $100, including several HOVR styles. Note that multiples across the active space are near record levels. The strides made by these models could act as a launching pad to future market prosperity.

Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.

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