The Baltimore Sun reports that sales at Under Armour will be $120 million less this year, due to the loss of a customer, The Sports Authority, which is bankrupt and has closed its stores. This part-year sales lost, almost 2.5% of annual revenues, is not expected to materially impact the financial performance of Under Armour.
Grandma said, “Don’t put all your eggs [sales] in one basket.” It appears that Under Armour’s customer base is well diversified, meaning the loss of one customer, is not likely to cause significant harm. In 2015, their largest customer accounted for 11.5% of net revenues.
You are probably thinking, “I have little in common with a company that does almost $5 billion in annual sales.” Your operations may not be on the same scale, but there is much we can learn from large public companies.
Federal securities laws require public companies to disclose information on an ongoing basis. For example, domestic companies must submit annual reports on Form 10-K. The 10-K, available free and on-line to the public, provides a comprehensive look inside the company and can sometimes shed light on strategic initiatives.
Companies are required to identify risk factors that could negatively impact their business. The factors are wide ranging and include what-ifs, such as the loss of key suppliers and customers, labor issues, legal proceedings, foreign currency changes, retention of key personnel, competitive actions, ability to raise capital and more.
This information is important for at least two reasons to small businesses.
- It’s free strategic intelligence about major competitors in your business sector.
- You may see some risks identified that are not on your radar today.
Check out this research tool. This will link you to the Under Armour, Inc. Form 10-K filed on 2/22/16 for the period ending 12/31/15.