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What's Next for Under Armour and Adidas Stock After Earnings?

Benjamin Rains


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 first quarter fiscal 2019 earnings results. The episode then dives into Adidas’ quarterly financials as the firm expands its e-commerce business to better compete against Nike NKE.

Under Armour reported its quarterly results before the opening bell last Thursday, May 2. UAA reported adjusted earnings of $0.05 per share, which topped our Zacks Consensus Estimate that called for break-even earnings. The sports apparel company’s revenue popped 2% to reach $1.2 billion and top Wall Street estimates. Shares of Under Armour climbed over 3.5% following its earnings release.

Despite the climb and top and bottom-line beats, Under Armour saw its quarterly revenue in North America fall 3%. The downturn in its largest market represents the continuation of a somewhat alarming trend. Meanwhile, its international sales popped 12% and footwear sales climbed 8%. With that said, its core apparel business grew just 1% and its direct-to-consumer revenue fell 6%. This downturn in DTC sales comes at a time when rivals and retail peers have seen their digital sales boom in the Amazon AMZN age. Luckily for UAA, the firm’s wholesale business, to retailers such as Dick’s Sporting Goods DKS, surged

Under Armour is in the midst of its restructuring and is set to streamline its business by lower inventory and product count. The company has also focused on its performance categories as Nike, Adidas, Puma, and Lululemon LULU all expand their sportswear and athleisure businesses. Despite its lack of compelling athleisure offerings, shares of UAA have surged over the last year and its earnings are projected to climb going forward.

Moving on, Adidas - ADDYY and ADS.DE - saw its shares soar Friday after the company reported its quarterly earnings results. The company’s e-commerce business soared 40% and chief executive Kasper Rorsted expects the German sportswear giant’s digital strength to continue for years to come. Adidas’ shoes and fashion-focused clothing have helped the company expand in recent years, especially in the U.S.

Rorsted said the company’s group of brand ambassadors, which includes Lionel Messi, Kanye West, and now Beyonce, are the best in the industry. Adidas’ Yeezy brand offerings have been some of the top performers on the secondary shoe market and have helped spark the success of companies such as GOAT Group, which Foot Locker FL recently invested in. Meanwhile, publicly traded high-end fashion e-commerce power FarFetch FTCH bought rival Stadium Goods late last year.

Going forward, investors should also pay close attention to how these brands utilize social media platforms such as Facebook’s FB Instagram. For instance, Deutsche Bank’s thinks that Facebook’s “Checkout on Instagram” feature could add $10 billion of revenue in 2021.

As a reminder, if you feel that we missed something, or if you have any topic suggestions, shoot us an email at podcast@zacks.com. Make sure to check out all of our other audio content at zacks.com/podcasts, and remember to subscribe and leave us a rating wherever you listen to your podcasts.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
Adidas AG (ADDYY) : Free Stock Analysis Report
NIKE, Inc. (NKE) : Free Stock Analysis Report
Under Armour, Inc. (UAA) : Free Stock Analysis Report
Farfetch Limited (FTCH) : Free Stock Analysis Report
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