Shares of Under Armour UAA skyrocketed on Tuesday morning after the company reported better-than-expected fourth-quarter revenues, bouncing back from its abysmal Q3. Now, as investors begin to assess the sports apparel company’s prospects for a continued recovery, let’s take a look at how UAA stacks up against one of its biggest industry rivals, Nike NKE.
Under Armour reported its Q4 and 2017 results before the opening bell today. Nike, which is on a somewhat-odd fiscal calendar, reported its second-quarter 2018 results on Dec. 21, 2017. Therefore, Nike’s previous quarter does not take into account the full holiday shopping period. On top of that, as most investors know, Nike is a much older and more established brand, while Under Armour is an upstart by comparison.
But investors can still easily compare these two sports apparel firms by looking at some key fundamentals.
Under Armour reported a fourth-quarter net loss of $87.9 million, based in part on a one-time impact from the new tax law, along with a $36 million loss attributable to its restructuring plan. On an adjusted basis, the company posted break-even earnings, falling just short of our Zacks Consensus Estimate of $0.01 per share.
Nike posted quarterly earnings of $0.46 per share, which topped our expectations by nearly 18% but marked an 8% year-over-year downturn. The sportswear giant attributed this drop to a decline in gross margin as well as higher selling and administrative expenses.
Under Armour’s quarterly revenues climbed 4.6% from the year-ago period. UAA posted Q4 sales of $1.37 billion, which also topped our $1.31 billion consensus estimate.
The company’s direct-to-consumer sales popped 11% to $575 million and accounted for 42% of global revenue in the quarter. This is an encouraging sign for Under Armour, which had relied heavily on wholesale revenue amid a downturn from Dick’s Sporting Goods (DKS) and traditional retail as a whole.
Footwear sales jumped 9.5% to $246.2 million, which is another hopeful sign for the recently struggling firm as this sector is where it will need to grow in order to compete with Nike and rival Adidas ADDYY long-term. However, apparel still accounted for nearly 70% of total quarterly sales.
Nike’s sales gained 5% year-over-year to hit $8.55 billion in its most recent quarter. Footwear, which is Nike’s dominant category, accounted for roughly 60% of total sales.
Under Armour expects its 2018 sales will jump by a low single-digit figure. Our current estimates are calling for UAA revenues to hit $5.15 billion, which would mark 4.7% year-over-year growth. The current Zacks Consensus Estimate projects similar 4.7% earnings growth.
The company also announced a new 2018 restructuring plan that is expected to cost between $110 million and $130 million. Under Armour noted that it hopes this plan will begin to save the company at least $75 million per year starting in 2019.
Nike is projected to see its current-quarter sales climb 4.39% to reach $8.80 billion, based on our current estimates. Nike’s full-year sales are also projected to gain 4.09% year-over-year to hit $35.76 billion. However, its quarterly earnings are expected to fall by over 20% to $0.54 per share, while its full-year EPS is projected to sink nearly 10%.
The Winner Is…
Both companies are spending more money as they try to shift more of their business online. Nike is bigger and more established around the world and in vital, valuable categories such as athleisure and footwear. Under Armour has struggled more recently, but the company has a plan to turn things around and just showed that it might be on track to do just that.
Both Nike and Under Armour are currently Zacks Rank #3 (Hold) stocks. Outlook here is mixed, but investors should be far from giving up on either of these companies.
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