Inflation is hitting all business segments. Not only in Mexico, but in all the countries of the world, prices rise and wages do not do so in the same proportion, which limits the purchasing power of consumers.
In this scenario, people must spend more of their budgets on paying utility bills (water, electricity), transportation and food, and less on clothing, entertainment and other non-essential products.
Some of the hardest hit items are footwear and sportswear, especially those of international brands with high sales prices.
With the exception of products considered “luxury”, which do maintain their level of consumption because these customers have not been affected by the crisis, the rest are beginning to see problems on the horizon.
Consumption of sportswear
Under Armor is an example of this new scenario for sportswear.
The US company cut its annual revenue and profit forecasts this Thursday, November 3, as the firm faces low demand from its, until now, loyal customers.
The company said in a note to investors that it is struggling with inflation — the highest in decades — and with the rising dollar hurting earnings in its markets outside the United States.
After two years of steady sales improvements following the pandemic, the vast majority of companies concentrating on the sportswear business are seeing their revenues and profits fall in recent months.
The explanation is simple: consumers must choose between food and clothing, and the decision is inevitable in favor of food.
In order to sustain sales, Under Armor followed the marketing strategy of other brands: grow discounts on its clothing and footwear. The problem is that by adding offers, profit margins are sacrificed.
As disclosed Thursday, Under Armor expects its fiscal 2023 net sales to grow by a meager single-digit percentage below 4 percent.
A few months ago, his previous forecast was 7 percent.
Regarding earnings, Under Armor expects to see its shares earn between 57 and 60 cents per unit at the end of fiscal year 2023, when less than a year ago they expected up to 67 cents.
Under Armor’s net income rose, but not as expected: just 2 percent to $1.58 billion in the quarter ended Sept. 30.
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