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Why Did Under Armour Stock Fall 8% on May 4?

Gabriel Kane

Yesterday’s Consumer Pops and Drops: UA, DLPH, TSLA, and ENR

(Continued from Prior Part)

Price movement of Under Armour

Under Armour (UA) has a market cap of $7.2 billion. It fell 7.5% to close at $39.51 per share on May 4, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -11.8%, -5.4%, and -2.0%, respectively, on the same day. This means that UA is trading 10.2% below its 20-day moving average, 7.1% below its 50-day moving average, and 10.8% below its 200-day moving average.

Related ETF and peers

The Guggenheim S&P 500 Pure Growth ETF (RPG) invests 1.2% of its holdings in Under Armour. The ETF tracks an index of primarily large-caps and mid-caps with strong growth characteristics. The index selects companies from the S&P 500 Index based on three growth factors. The YTD price movement of RPG was -1.9% as of May 3, 2016.

The market caps of Under Armour’s competitors are as follows:

  • Nike (NKE): $98.9 billion
  • Skechers USA (SKX): $5.2 billion
  • Columbia Sportswear (COLM): $4.2 billion

Under Armour’s new organizational changes

Under Armour fell 7.5% after the announcement of organizational changes in its management team. Henry Stafford, chief merchandising officer, and Robin Thurston, chief digital officer, are leaving the company in July 2016.

Stafford joined the company in 2010. He was leading the company’s apparel team and then become the president of the North America region. Thurston joined the company with the acquisition of MapMyFitness in December 2013.

Kip Fulks and Micheal Lee will take over as chief merchandising officer and chief digital officer, respectively.

Rating downgrade

Brean Capital has downgraded Under Armour to “hold” from “buy.”

Performance of Under Armour in 1Q16

Under Armour reported fiscal 1Q16 net revenues of $1.1 billion, a rise of 30.2% compared to net revenues of $804.9 million in fiscal 1Q15. Revenue from apparel, footwear, accessories, licensing, and connected fitness rose 20.0%, 64.2%, 26.2%, 14.7%, and 119.4%, respectively, in fiscal 1Q16 compared to fiscal 1Q15. The company’s cost of goods sold as a percentage of net revenues and income from operations rose 1.9% and 26.0%, respectively, in fiscal 1Q16 compared to fiscal 1Q15.

Its net income and EPS (earnings per share) rose to $19.2 million and $0.04, respectively, in fiscal 1Q16. This compares to $11.7 million and $0.03, respectively, in fiscal 1Q15.

Under Armour’s cash and cash equivalents and inventories rose 20.9% and 6.6%, respectively, in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio fell to 2.9x, and its debt-to-equity ratio rose to 0.85x in fiscal 1Q16. This compares to a current ratio and debt-to-equity ratio of 3.1x and 0.72, respectively, in fiscal 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • net revenues: ~$5.0 billion
  • operating income: $503 million–$507 million
  • interest expense: ~$35 million
  • effective tax rate: ~38.5%
  • fully diluted weighted average shares outstanding: ~446 million of the Class C stock dividend

Now let’s take a look at Delphi Automotive.

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