Under Armour Inc (UAA) Stock Remains a Terrible Investment
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Investments always operate on the principle of the unknown. Despite the most rigorous analysis and a library of sourced facts, you can never be entirely sure of your position. This is both the allure and the pitfall of Wall Street. But at some point, you have to call it how it is: Under Armour Inc (NYSE:UAA) consistently failed to deliver the goods. And I still think UAA stock has further downside before it gets better.
Source: University of Delaware Via Flickr
Individually speaking, I’ve had a peculiar relationship with UAA stock. Of all the investments I’ve covered, UAA seems to bring out the worst in people. Since initiating my bearish outlook, internet trolls mocked my every argument, replete with ad homonym.
Recently, such attacks escalated into personal intrusions. Some unfortunate members of the UAA bull community intended to intimidate me. The irony is that these deranged behaviors only strengthen the bearish perspective.
First, anyone that engages in cyber-stalking and intimidation on the basis of a financial analysis needs to get a life. If you’re that emotional about UAA stock or any asset class, you need to seriously reevaluate your motivations.
Second, I’ve been consistently right about Under Armour. My last article on the subject was published on July 25. Since then, UAA shares are down 10.7%. I don’t have any insider knowledge, nor do I have skin in the game. I simply adhere to the theory that the markets project all publicly available information.
In my opinion, that information did not look at all appealing for UAA stock. I then can’t turn around and tell you to buy just because someone intimidated me: that’s just as bad as a “pump and dump.”
The Retail Market Is Shrinking
Given all the drama, I have every incentivize to finally go bullish on Under Armour, and call it a day. But at the risk of yet more abuse, I’m still bearish on UAA stock, and here’s why:
In my last write-up, I mentioned that the broader retail market is troubled. I still affirm that statement, but with a slight nuance. Retail is shrinking, forcing players to forward only their best products or risk elimination. For the sports apparel market, the consumer economy cannot accommodate everyone. Herein lies a critical problem.
At time of writing, Nike Inc (NYSE:NKE) is up 16% year-to-date. Key rival adidas AG (ADR) (OTCMKTS:ADDYY) is up a whopping 45%, making me wish I had skin in this game. In stark contrast, UAA stock is down 38% YTD. Under Armour is the odd-man out in an increasingly restrictive market.
Source: Federal Reserve Economic Data
For those that need further convincing, check out the consumer price index for apparel.
Generally speaking, the trend has been flat over the past five years. Now look at the CPI for footwear. Though slightly more favorable, we still see a flat trend in the trailing five-year period. The evidence speaks for itself: American families are spending less money for their clothing and shoes.
To be bullish on UAA means that Under Armour found the magic formula to attract more customers than its competitors. But if that were the case, why are UAA shares in the dumps?
Under Armour Faces Uphill Consumer-Economy Obstacle
Everyone is entitled to their own opinion. But people are not entitled to their own facts. Consumer sentiment is down since President Donald Trump took office. Housing prices and other living expenses have gone up. These pressures have negatively impacted the broader athletic and sporting goods industry.
It’s not that Under Armour is destined to lose. But the reality is that under a shrinking market, you have to have something truly special to survive and thrive. Both Wall Street and UAA management themselves are less than thrilled with its future prospects.
Bottom Line on UAA Stock
If, after listing a litany of facts, investors are still personally angry with me about not believing in Under Armour, may I suggest a redirection of your animus?
Shouldn’t the company’s executives be blamed for your investment woes? After all, if they didn’t chase one costly endorsement deal after another, maybe they wouldn’t have to lay off 9% of their workforce.
Here’s the bottom line for UAA stock. I’m more than willing to become a buyer. But to do so, I need to see a catalyst. Rising consumer confidence, increased foot traffic to sporting goods stores, an endorsement moratorium — I’ll take any of them. Instead, we’re seeing increasing challenges. Go long Under Armour if you must. Just don’t cry to me (or threaten me) if things don’t work out.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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