CEO 'Not Satisfied'
Under Armour CEO Patrik Frisk said during the company's conference call he is "not satisfied with where we are today." The company faces two challenges moving forward, including ongoing softness in North American demand and a "highly committed cost structure" which limits the company's ability to "spend as aggressively as we would like."
Meanwhile, the company could reverse a prior decision to open a flagship New York City store in the heart of Manhattan on Fifth Avenue. Management also expects the coronavirus to impact first quarter sales by $50 million to $60 million on top of a $325 million to $425 million restructuring pre-tax charge this year.
The Under Armour Analysts
Bank of America analyst Robert Ohmes maintains an Underperform rating on Under Armour's stock with an unchanged $15 price target.
Piper Sandler analyst Erinn Murphy downgraded from Overweight to Neutral, price target lowered from $27 to $19.
Raymond James analyst Matthew McClintock maintains at Strong Buy, price target lifted from $30 to $25.
BofA: Ongoing Demand Challenges
Under Armour's fourth quarter saw slower than expected revenue growth at 3.7% versus expectations of 6.0% and softer direct-to-consumer growth at 2% versus expectations of 10%. Ohmes said Under Armour suffered from ongoing challenges in North America Factory Doors and softness in multiple e-commerce regions.
Under Armour is expected to face challenges in the North American business due to headwinds from off-price sales and ongoing softness in online sales, the analyst wrote in a note. Management even highlighted that "prior promotional activity has impacted consumers' willingness to pay full price."
Piper Sandler: Pause On Margin Recovery Story
Under Armour's management guided full-year 2020 EPS to a range of 10 cents to 13 cents versus the Street's prior estimate of around 47 cents per share. Murphy said the magnitude of the miss was unexpected and a return to double-digit EBIT margins are "less likely" within management's five-year plan.
"Although our bull thesis was never predicated on NA share gains, the glide path forward is more muted," Murphy wrote in a note.
Raymond James: Bullish Thesis 'Pushed Out'
The bullish thesis on Under Armour's stock has merely been "pushed out," McClintock said. The company deserves credit for showing "significant progress" over the past few years and there were new signs of progress in the quarter, including:
- Gross margin growth of 220 basis points
- Reduced inventories in the channel
- A 23% reduction in inventory on the balance sheet over the past two years while sales grew 6%
- Notably lower sales into the off-price category
- An improved supply chain and infrastructure
"We believe that UAA remains a rare commodity, in that it is a strong brand with significant equity and recognition in an industry that historically allows for turnarounds," McClintock wrote.
UAA Price Action
Under Armour's stock traded around $17.30 per share at time of publication.
Latest Ratings for UAA
|Feb 2020||Maintains||Strong Buy|
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