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Under Armour tightens inventory to boost margins


Under Armour is tighteningits inventory, says a report by Retail Dive.

This will help the brand better how much product sits in its reserve, limit low-demand products and focus on getting the items that are in demand. The strategy has involved consolidating vendors and cutting SKUs.

Controlling inventory and simplifying its supply chain has helped the brand boost its profit margins in the past. And the better-than-expected margins for its Q1 2021 gives hope that it can work going forward, too. The potential financial benefits to managing inventory may somewhat balance out with the freight increases expected due to transportation and logistic challenges.

Under Armourhas been impacted by the barrage of supply chain challenges over the last year. As a result, the company shifted to figuring out what they could do to mitigate issues by optimizing the inventory they could get.

Tight inventory management has translated into items selling faster and reducing returns, allowing for Under Armour to set prices that are more favorable, compared to relying on promotional sales to move inventory, Bergman said.

The company expects Q2 gross margins to decrease about 120 to 140 basis points in the second half of the year due to container-availability issues and port delays, but it said its supply chain is currently navigating the challenges "fairly well."