Shares of Under Armour Fall On Uncertain Future

 

Published February 11,2020

Under Armour’s stock fell after the company failed to impress investors in the first leg of its comeback strategy. 

Shares plunged by more than 15 percent Tuesday in pre-market trading hours after the Baltimore, Md.-based athletic apparelaccessories and footwear brand reported weaker-than-expected quarterly earnings.

Under Armour is an operationally better company following our transformation over the past few years, with a clearly defined and focused strategy, enhanced go-to-market process, cleaner inventories and a stronger balance sheet,” Patrik Frisk, Under Armour’s president and chief executive officer, said in a statement. “However, ongoing demand challenges and the need to drive greater efficiencies in our business requires us to further prioritize our investments to put our company in the best position possible to achieve sustainable, profitable growth over the long-term.”

For the three-month period ending Dec. 31, revenues rose about 4 percent to $1.44 billion, up from $1.38 billion during 2018’s fourth quarter. But the company had a loss of $15.3 million, compared with profits of $4.2 million the same time last year. The company credited this to a $23 million tax expense, as well as a $39 million impairment charge on an equity investment Under Armour has in Japan

Revenues for all of 2019 were $5.26 billion, compared with $5.19 billion in 2018. Meanwhile, profits were $92.1 million, compared with a loss of $46.3 million in 2018. 

But moving forward, the company anticipates even further losses, most notably because of the ongoing coronavirus in China. In 2020’s first quarter, the retailer expects sales declines of between $50 million and $60 million.

“Given the significant level of uncertainty with this dynamic and evolving situation, full year results could be further materially impacted,” according to a statement. In addition, “the following outlook also does not include any possible benefits or costs from a potential restructuring initiative.”

This quarter also marks Frisk’s debut as ceo. 

Last October, Under Armour founder and former ceo Kevin Plank abruptly announced that he would be stepping down Jan. 1. Instead, Plank would take the helm as executive chairman and brand chief. Other c-suite changes include Colin Browne appointed chief operating officer earlier this month, and Paul Fipps named chief experience officer, Under Armour’s first. 

Frisk told WWD in January that Under Armour was focused on growing its retail fleet. But in Tuesday morning’s quarterly results, the company said it was reconsidering its plans for a New York City flagship.

In addition, the company continues to be plagued by an ongoing SEC security probe and heightened competition in the world of ath-leisure and activewear

“The brand remains focused on the technical aspect of their apparel,” said a note by Jane Hali & Associates. “[Under Armour] is focused on functionality rather than trends in the active and athleisure space. The brand does not have many collaborations with trending celebrities or brands that would help them gain. We are yet to hear news on an impressive business strategy that would help [the company] gain share in the activewear market.”

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