The Cloud

Under Armour Discloses Hiccups in SAP Implementation

"The change management has been a little tougher than we expected," said CFO David Bergman.
Vincent RyanNovember 1, 2017
Under Armour Discloses Hiccups in SAP Implementation

Athletic apparel firm Under Armour is one of SAP’s most-touted customers. At a New York event in October, the software giant trotted out an Under Armour enterprise transformation executive to describe the company’s journey toward adopting S/4HANA, SAP’s in-memory enterprise management business suite.

But, as it turns out, Under Armour’s SAP implementation project isn’t going so smoothly.

On Under Armour’s third-quarter earnings call on October 31, Patrik Frisk, the company’s president and chief operating officer, said the struggles with the July 1 launch of its integrated ERP business solution “negatively impacted” third-quarter results by causing disruptions in Under Armour’s supply chain.

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“During this system migration, we have encountered a number of change management issues impacting our workforce and manufacturing partners as they adapt to the new platform and processes,” said Frisk. Those issues caused delayed shipments and loss of productivity, he added.

Explaining the problems to an analyst on the conference call, CFO David Bergman said that “the change management [has] been a little tougher than we expected, including working .. with our inventory partners, our vendors, trying to get them up and trained on the system as well and just getting all of the things in place.”

Bergman emphasized that the system is now “operating well” and is “stable,” but he did say that Under Armour is still working through “the change management and the learnings and the reporting.” While those issues won’t impact fourth-quarter earnings as much, Bergman said, “they won’t be completely gone yet.”

Under Armour earned $54 million, or 12 cents a share, on revenue of $1.4 billion in the third quarter.That was down 5% from a year ago. The company also lowered its outlook for 2017 earnings and revenue. It now projects year-long profit of 18 cents to 20 cents a share, compared with the 37 cents a share expected by Wall Street analysts.

Due to the system implementation, inventory rose 22% in the third quarter, to $1.2 billion.

Under Armour’s SAP install is sizable, involving point-of-sale, warehouse management, inventory control, merchandising, and product allocation systems in both North America and Europe.

According to SAP, it currently has 6,300 customers in 25 industries on S/4HANA.