Daily Management Review

Under Armour becomes second-worst in S&P 500


02/01/2017


Shares of sportswear manufacturer Under Armour collapsed after the company published its fiscal report. The paper shows decrease in forecast on the main indicators.



MtJulietEditor96
MtJulietEditor96
Under Armour’s shares fell more than 25%, to $ 21.49. The company said it expects fall in gross profit in the current year due to changes in exchange rates. The manufacturer’s performance was affected by fact that demand for foreign companies’ products is growing faster than popularity of North American producers.

Together with strategic investments planned for the following year, this will reduce the operating profit by 24% - from 420 million in 2016 to $ 320 million in 2017.

Under Armour's net profit in 2016 increased by 11.2% and amounted to 258.7 million dollars. Revenues grew by 22%, to 4.83 billion. In the IV quarter, net profit of Under Armour declined by 0.7% - to 104.9 million, while net sales fell by 12% and amounted to 1.31 billion. The company forecasts growth revenue in 2017 by 11-12% - to $ 5.4 billion.

Now, Under Armour’s shares are the second worst within S&P 500 this year. Given a 30-percent drop in prices in 2016, the picture is sad. Overall, the sports industry is going through hard times. Sports Authority and City Sports recently left the game, and Finish Line has closed hundreds of stores. Even sports industry giant Nike’s performance has dropped by 23% last year, becoming the worst within Dow Jones.

Considering the overall situation, decline in Under Armour does not seem out of the ordinary. Today, the company's shares are trading around 58% below its high of $ 46.53 reached in late April. Given projections of the company and the fact that its CFO Chip Molloy is leaving his post for some personal reasons, it seems that Under Armour’s problems are just beginning.

Yet, despite the troubles, the manufacturer is still rather optimism and is going to open new stores soon. The company is going to combine traditional approach to sales with a "unique experience". In addition, at the beginning of 2017, Under Armour clothing should appear in retail chain Kohl.

According to UBS analyst Michael Binetti, it will "further restrict the heterogeneity of revenue."

source: fortune.com






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