Under Armour 2015 Annual Report Download - page 20

preferences that cannot be predicted with certainty. In addition, long lead times for certain of our products may
make it hard for us to quickly respond to changes in consumer demands. Our new products may not receive
consumer acceptance as consumer preferences could shift rapidly to different types of performance or other
sports products or away from these types of products altogether, and our future success depends in part on our
ability to anticipate and respond to these changes.
Even if we are successful in anticipating consumer preferences, our ability to adequately react to and
address those preferences will in part depend upon our continued ability to develop and introduce innovative,
high-quality products. If we fail to introduce technical innovation in our products, consumer demand for our
products could decline. In addition, if we experience problems with the quality of our products, we may incur
substantial expense to remedy the problems. Our failure to anticipate and respond timely to changing consumer
preferences or to effectively introduce new products and enter into new product categories that are accepted by
consumers could result in a decrease in net revenues and excess inventory levels, which could have a material
adverse effect on our financial condition.
Our results of operations could be materially harmed if we are unable to accurately forecast demand for
our products.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our
manufacturers before firm orders are placed by our customers. In addition, a significant portion of our net
revenues are generated by at-once orders for immediate delivery to customers, particularly during our historical
peak season, during the last two quarters of the year. If we fail to accurately forecast customer demand we may
experience excess inventory levels or a shortage of product to deliver to our customers.
Factors that could affect our ability to accurately forecast demand for our products include:
• an increase or decrease in consumer demand for our products;
• our failure to accurately forecast consumer acceptance for our new products;
• product introductions by competitors;
• unanticipated changes in general market conditions or other factors, which may result in cancellations
of advance orders or a reduction or increase in the rate of reorders placed by retailers;
• the impact on consumer demand due to unseasonable weather conditions;
• weakening of economic conditions or consumer confidence in future economic conditions, which could
reduce demand for discretionary items, such as our products; and
• terrorism or acts of war, or the threat thereof, or political or labor instability or unrest which could
adversely affect consumer confidence and spending or interrupt production and distribution of product
and raw materials.
Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the
sale of excess inventory at discounted prices, which could impair our brand image and have an adverse effect on
gross margin. In addition, if we underestimate the demand for our products, our manufacturers may not be able to
produce products to meet our customer requirements, and this could result in delays in the shipment of our
products and our ability to recognize revenue, as well as damage to our reputation and retailer and distributor
relationships.
The difficulty in forecasting demand also makes it difficult to estimate our future results of operations and
financial condition from period to period. A failure to accurately predict the level of demand for our products
could adversely impact our profitability.
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