Under Armour Stock Down 25% After Weak Earnings Report
Under Armour Inc (NYSE:UAA) fell by 25% in pre-market trading on Tuesday as the athletics company registered disappointing holiday sales and issued a less-than-expected sales target for 2017. Under Armour stock also took a hit as Chief Financial Officer Chip Molloy announced that he would be stepping down next month due to “personal reasons.”
Molloy’s departure is also rather sudden. He had only served as CFO for a little over a year after holding the same position at PetSmart, Inc. (NASDAQ:PETM). Current Senior Vice President of Corporate Finance David Bergman will assume the role of CFO on February 3.
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The holiday season, when presents are sometimes stuffed with expensive athletic gear, is normally a boon for companies like Under Armour, but 2016 proved to be a difficult holiday retail season for the company. (Source: “Here’s Why Shares of Under Armour Are Plummeting Today,” Fortune, January 31, 2017.)
Under Armour stock projected 11% to 12% revenue growth in 2017, to reach nearly $5.4 billion, which fell below analyst expectations of $6.05 billion. Fourth-quarter results of $1.3 billion in revenue and per-share profit of $0.23 also missed the mark.
CEO Kevin Plank, in a presentation to analysts, listed a number of difficulties facing Under Armour. Plank explained that recent sports apparel brick-and-mortar retail bankruptcies hurt the company’s sales figures. Under Armour stock is more vulnerable to difficulties faced in the American market versus competitors, as it derives 85% of its revenue from North America.
Plank also said that deeper discounting, slower retail traffic, and more promotions earlier in the 2016 holiday shopping season contributed to the damaged Under Armour stock performance.
“I want to be clear, our growth story is intact,” said Plank. “What you won’t hear from us today are excuses.”
Under Armour stock had a dismal 2016, dropping 64%. This was largely pushed by the issuance of a new stock class in April of last year that saw UAA stock prices tumble from the mid-$80s down to the current price of $21.00. The move was done to help protect the voting rights of Plank. (Source: “Why Did Under Armour Fall By 50% On Friday?” Seeking Alpha, April 11, 2016.)
But it’s not all bad news.
While the 2017 guidance was lowered and some analysts are rightly concerned over the future UAA stock prospects, Under Armour did manage to register impressive growth abroad, increasing international sales by 63%, versus North American sales growth of 16%. The North American growth rate disappointed investors and analysts, however, who typically expect numbers exceeding 20%.
