Under Armour 2012 Annual Report Download - page 20

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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 customer 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.
We operate in a highly competitive market and the size and resources of some of our competitors may
allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease
in our net revenues and gross profit.
The market for performance apparel, footwear and accessories is highly competitive and includes many new
competitors as well as increased competition from established companies expanding their production and
marketing of performance products. Because we currently do not own any fabric or process patents, our current
and future competitors are able to manufacture and sell products with performance characteristics and
fabrications similar to our products. Many of our competitors are large apparel and footwear companies with
strong worldwide brand recognition. Due to the fragmented nature of the industry, we also compete with other
manufacturers, including those specializing in outdoor apparel and private label offerings of certain retailers,
including some of our retail customers. Many of our competitors have significant competitive advantages,
including greater financial, distribution, marketing and other resources, longer operating histories, better brand
recognition among consumers, more experience in global markets and greater economies of scale. In addition,
our competitors have long term relationships with our key retail customers that are potentially more important to
those customers because of the significantly larger volume and product mix that our competitors sell to them. As
a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise
increase their market share by:
• quickly adapting to changes in customer requirements;
• readily taking advantage of acquisition and other opportunities;
• discounting excess inventory that has been written down or written off;
• devoting resources to the marketing and sale of their products, including significant advertising, media
placement, partnerships and product endorsement;
• adopting aggressive pricing policies; and
• engaging in lengthy and costly intellectual property and other disputes.
In addition, while one of our growth strategies is to increase floor space for our products in retail stores and
generally expand our distribution to other retailers, retailers have limited resources and floor space, and we must
compete with others to develop relationships with them. Increased competition by existing and future
competitors could result in reductions in floor space in retail locations, reductions in sales or reductions in the
prices of our products, and if retailers earn greater margins from our competitors’ products, they may favor the
display and sale of those products. Our inability to compete successfully against our competitors and maintain
our gross margin could have a material adverse effect on our business, financial condition and results of
operations.
Our profitability may decline as a result of increasing pressure on margins.
Our industry is subject to significant pricing pressure caused by many factors, including intense
competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products and
changes in consumer demand. These factors may cause us to reduce our prices to retailers and consumers, which
could cause our profitability to decline if we are unable to offset price reductions with comparable reductions in
our operating costs. This could have a material adverse effect on our results of operations and financial condition.
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