India Business

Under Armour Is Gassed As The Brand Faces Worst Opening

AP |

Under Armour is gassed.

Shares in the sports gear company had their worst opening in years on Tuesday after posting fading revenue and cutting its outlook, again.

“While our international business continues to deliver against our ambition of building a global brand, operational challenges and lower demand in North America resulted in third quarter revenue that was below our expectations,” said CEO Kevin Plank. “Based on these issues in our largest market, we believe it is prudent to reduce our sales and earnings outlook for the remainder of 2017.”

Revenue in North American revenue fell more than 12 percent in the third quarter and the Baltimore company lowered its annual per-share earnings forecast for the second time in three months, to between 18 and 20 cents per share. That’s about half what it told investors to expect in August.

Perhaps looking for a silver lining, industry analyst Randal Konik at Jefferies wrote, “The guidance is lowered so significantly that the company should be able to meet or beat its outlook.”

Quarterly profit was $54.2 million, or 12 cents per share. Earnings, adjusted for restructuring costs, came to 22 cents per share, which was actually 3 cents better than Wall Street had expected, according to a survey by Zacks Investment Research. Under Armour reported earnings of $128.2 million, or 29 cents per share, for the third quarter last year.

Yet revenue slumped 5 percent to $1.41 billion, short of Wall Street’s expectations of $1.49 billion. Shares tumbled more than 13 percent at the opening bell Tuesday. Neil Saunders, the managing director of GlobalData Retail, asked “how did the one-time powerhouse of sports retail lose so much traction so quickly?”

There has been pressure on the entire sportswear sector, with U.S. consumers increasingly elusive, but Saunders believes Under Armour is in an especially tough place.

“This is now about more than external factors; it demonstrates issues with the brand and its proposition,” Saunders wrote. “Especially so since other brands and retailers, including Lululemon, have not posted such calamitous figures.”

Gross margins at Under Armour, which excludes a $4 million impact from restructuring efforts announced this year, was 46.2 percent, a decrease of 130 basis points compared with the same period last year.

The company said it would cut almost 2 percent of its work force in August to lower costs.

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