Shares for Under Armour Inc. have been in flux over the past 24 hours following a report from analysts who shared bearish forecasts for the sportswear giant’s performance this fiscal year.
A distribution note shared yesterday by J.P. Morgan Securities LLC analysts estimated fourth-quarter sales for the Baltimore-based firm will grow 4.7%, below consensus bets of a 5.6% gain, and earnings per share at 10 cents to match the Street’s predictions. They attributed their lower figures to ongoing sluggish sales in North America, which has struggled to keep up with top rivals Nike and Adidas. Under Armour also continues to put emphasis on performance-driven merchandise while athleisure trends dominate much of the market.
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“Based on our recent work, we see the cadence of North America second-half revenues weighted with sequential improvement in wholesale and new full-price store openings not sufficient to fill the hole from the continued reduction in off-price shipments activity and potential ‘full-price hangover’ effect post off-price availability,” J.P. Morgan analysts wrote.
As of 12:45 p.m. ET, the company’s stock was up 0.73% to $20.59 but had dropped more than 6% after J.P. Morgan cut its price target from $28 to $23.
Under Armour has suffered a period of deceleration in its home turf of North America, where revenues slowed 4% to $1 billion in the third quarter ended Sept. 30, while international sales climbed 5% to $368 million. That same month, the athletic firm tapped Stephanie Pugliese to helm the region’s business following a number of high-profile exits, including former North America president Jason LaRose, who departed at the end of April.
The company’s stock was also potentially affected after Lululemon founder Chip Wilson said in a CNBC interview on Monday afternoon that the market for sportswear is a four-way competition among Nike, Adidas, Lululemon and Chinese manufacturer Anta Sports. “I think Under Armour kind of lost it many years ago,” he said. “I think they got stuck in the Sports Authority bankruptcy.” Under Armour declined to comment.
Looking forward, J.P. Morgan’s analysts also lowered their 2020 expectations on both the top line and bottom line, with revenues rising 3.7% (versus a 4.7% increase) and profits climbing $298 million (versus a $311 million increase).
For the full year, Under Armour predicts EPS to reach the high end of the previously given range of 33 cents to 34 cents. The company lowered its sales expectations for the year, forecasting growth of 2% compared with the previous range of 3% to 4%. It cited lower-than-planned excess inventory for the off-price channel, ongoing direct-to-consumer challenges and negative impacts from foreign currency changes.
The firm is still in the midst of executing the five-year turnaround plan introduced at its investor day in December 2018, where it doubled down on its performance-first approach — a strategy that has put much of Wall Street on the fence. Last week, founder Kevin Plank stepped aside from his post as CEO, which is now held by president and former COO Patrik Frisk.
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