BALTIMORE – Under Armour had one of the worst trading days in its history as investors sensed that the hard-charging athletic company may be hitting the wall.
The company reported Tuesday that quarterly revenue growth was the slowest in six years and it trimmed growth projections.
Chief Financial Officer Chip Molloy said that while Under Armour continues to believe that it will significantly outpace rivals, “the growth rate going forward will be less than” what was anticipated last year.
Class A shares of Under Armour Inc., which have voting power, tumbled 14 per cent, the severest decline in eight years.
Under Amour is locked in a fight for sports dominance with longtime king of the hill, Nike. They have spent heavily on promotions and that has cost both companies, at least in the short term.
Gross margins at Under Armour slipped to 47.5 per cent in the quarter, compared with 48.8 per cent last year.
Nike reported gross margins had slipped from 47.5 per cent last year, to 45.5 per cent, when it reported its most recent quarterly results in late September.
The Baltimore company was stripped of its ‘buy’ rating at Stifel Nicolaus and analyst Jim Duffy cut his target price sharply, citing margin pressure.
“While revenue growth remains strong (expectations for low-twenties growth in both 2017 and 2018, mix drag to gross margin and heightened investment in infrastructure (international and digital) and sports marketing are resulting in margin compression,” Duffy wrote.
For the period ended Sept. 30, Under Armour earned $128.2 million, or 29 cents per share, which was 4 cents better than Wall Street had expected, and topped last year’s $100.5 million, or 23 cents per share.
Revenue rose to $1.47 billion, from $1.2 billion, thanks to strong shoe sales and strong growth overseas. That also beat the $1.45 billion in revenue Wall Street had expected, according to analysts surveyed by Zacks Investment Research.
International sales, which made up 15 per cent of total revenue for the quarter, surged 74 per cent. North American sales climbed 16 per cent.
Shoe sales jumped 42 per cent, driven by strong growth in running and basketball. Clothing sales and accessories sales both climbed 18 per cent.
However, Under Armour’s quarterly revenue growth of 22 per cent was the slowest it’s been since 2010.
Under Armour stuck to its full-year projections for revenue of $4.93 billion, which is about the same as the projections from industry analysts.
Shares of Nike Inc. are down 19 per cent this year. They have been outpaced by Under Armour, down 22 per cent.
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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on UA at http://www.zacks.com/ap/UA
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Keywords: Under Armour, Earnings Report
