by Umar Farooq
Founded in 1996 by former University of Maryland football player Kevin Plank, Under Armour is the originator of performance apparel – gear engineered to keep athletes cool, dry and light throughout the course of a game, practice or workout. Under Armour stock is tanking after it posted weak fourth-quarter earnings on Tuesday morning. The apparel company missed on both revenue and earnings per share against analyst expectations. Earnings for the fourth quarter came in at $0.23 a share against analyst expectations of $0.25. Revenue also whiffed at $1.31 billion, lower than projections of $1.41 billion. The company also lowered its guidance for 2017, bringing estimates for operating income down to $320 million and a smaller gross margin.
“The current environment represents an inflection point to maximize our unique strengths by staying on offense — investing smartly in innovation, deepening our Brand connection with consumers and amplifying our focus on operational excellence — positioning Under Armour as a stronger company,” CEO Kevin Plank said in a press release. The company also announced that CFO Chip Molloy was leaving the company effective Friday for “personal reasons.”
Susan Anderson, a consumer research analyst at FBR Capital Markets, said on CNBC’s “Squawk Box” that she was not overly surprised by the performance, given the industry’s oversupply and recent bankruptcies like that of Sports Authority last June.
“I think we are, based on their guidance, going to see slower growth over the next year as we … work through some North America issues,” she said, noting several promising areas in the report where Under Armour could see improvement.
“We are still seeing international growth over 50 percent and then also footwear, which I think was expected to be light, was still very strong, over 30 percent,” she continued. “So I think those are really the two growth platforms that we’re going to start to see take hold over the next several years.”
She said Under Armour stock was still worth holding for the long term.
“I like it over Nike,” she said. “It’s one that is still going to have double-digit top-line growth, which is very hard to find these days … in retail or apparel.”
And, despite Nike’s $30.5 billion in revenue for 2016 compared to Under Armour’s $4.8 billion, “I think there’s still a long runway of growth for them,” Anderson said. “I think it’s going to come out a winner.”
by Umar Farooq