Under Armour Still Feeling The Pain From Sports Authority – Forbes
Sports apparel giant Under Armour is plunging over 20% to approximately $18.90 this morning after the company missed its earnings and sales estimates for the fourth quarter, while also announcing that its chief financial officer is leaving.
Where to start? On the one hand, Under Armour did deliver increases in revenue and sales, which is pretty good considering the overall apparel market, but nowhere near what it has delivered in the past and at a time when athleisure continues to enjoy its moment in the sun. Revenue for the fourth quarter ending Dec. 31 increased 12% to $1.31 billion, but analysts had expected $1.41 billion and this was the slowest growth in eight years. Under Armour is forecasting that revenue in 2017 will near $5.4 billion, which is an increase of 11-12%, but this is disappointing given analysts that had pegged the number at $6.05 billion.
Chief Executive Officer Kevin Plank said, “Numerous challenges and disruptions in North American retail tempered our fourth quarter results.”
One Under Armour’s greatest challenges was the disruption in the retail environment. “The Sports Authority and Sport Chalet bankruptcies certainly shook the industry, with the greatest impact hitting in the fourth quarter, when both retailers were fighting for their survival,” said Matt Powell, sports industry analyst at The NPD Group. “It is likely that we will still see the impact continue through Q1, but after that the drag should be over and trend should return to normal,”
Gross margins fell to 44.8% from 48% as the company sold more shoes, but shoes are less profitable for Under Armour. Footwear revenues increased 36% to $228 million, driven by growth in running and basketball shoes. Steph Curry giveth and taketh away. Expenses also shot up 9% to $420 million as the company continues to invest in its online business. On a positive note, direct-to-consumer revenues did increase 23% to $518 million for the quarter.
Net sales jumped 5.9% in North America, but normally they rise by about 24%. Excluding items, earnings came in at 23 cents per share, but this missed the analyst expectations of 25 cents per share. Normally, the fourth quarter holiday shopping boosts sales, but in Under Armour’s case it didn’t help.
Additionally, Under Armour announced that its chief financial officer Chip Malloy would step down. Senior Vice President David Bergman will take over as acting CFO. Malloy is leaving for personal reasons, but the timing is being met with skepticism from the investing community. Retail expert Stacey Widlitz tweeted, “As we know in retail where there is smoke…CFO leaving.”