Welcome to the latest episode of the Full-Court Finance podcast from Zacks Investment Research where Associate Stock Strategist Ben Rains breaks down Under Armour’s UAA second quarter financial results and dives into the sportswear firm’s future as it spends millions to revamp its business.
Shares of Under Armour have slipped since it reported its quarterly earnings results last Thursday. Under Armour’s Q2 revenues climbed roughly 8% to hit $1.17 billion, which topped our Zacks Consensus Estimate of $1.15 billion. The company also reported a total quarterly loss of $95.5 million, with $79 million coming from restructuring and impairment charge. This led to an adjusted loss of $0.08 per share.
Looking ahead, the company reaffirmed its fiscal 2018 adjusted earnings guidance and expects its revenue to climb by approximately 3% to 4%. UAA expects its international sales to climb 25%, but projects a low to mid-single digit decline in North America. On its face, sales growth outside of North America is great, but can the company handle a decline in what is by far its most important market?
The Baltimore-based company announced that it will increase its restructuring costs to between $190 million and $210 million, up from its February estimate of as much as $130 million. Under Armour’s investment is the right move as it tries to bolster its e-commerce and direct-to-consumer sales in the age of Amazon AMZN. However, the firm’s massive miscalculation as to how much its restructuring will cost might be a sign that things are far worse than anyone could have expected.
Under Armour also faces an identity crisis. As athleisure becomes more and more popular, some of Under Armour’s best success has come via its workout gear-heavy partnership with Dwayne "The Rock" Johnson. Meanwhile, Lululemon LULU and smaller brands are carving out their place in athleisure.
Furthermore, giants Nike NKE and Adidas ADDYY, as well as Puma, have evolved with the industry while also expanding their presence in popular culture and social media—UAA lags far behind its competition on Instagram FB and Twitter TWTR. Plus, Under Armour’s plan to expand internationally lacks one integral segment.
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