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Under Armour plummets on disastrous quarterly results, analysts downgrade stock

Under Armour

One of the biggest losers came from a well-known athletics clothing producer. Under Armour (NYSE: UA) saw its shares plunge after the company reported its quarterly results which were drastically below what investors were expecting. Although a fair bit of this quarter’s poor results came from the coronavirus, which impacted sales in China, many analysts think this is just one symptom in a much bigger problem.

The company’s CEO, Patrick Frisk, went on to say that around $50 million to $60 million in sales were lost due to the coronavirus epidemic. While hundreds of stores in the Asian market will be closed, the company’s North American operations are struggling as well. While the company’s management expects this area to turn back around and see growth sometime in 2020, even that’s still an uncertainty.

To make matters worse, Under Armour is considering abandoning its New York City flagship location in the near future. While the blow would be more symbolic than anything else, it goes to show just how bad the retailer is doing.

“As a brand, we see a paradox of two challenges in front of us: continued softer demand in North America as we work through our elevated inventory in multiple years of discounting, and a highly committed cost structure which is taking longer to unpack and is limiting us from being able to spend as aggressively as we would like to increase brand consideration,” said Frisk on the Tuesday earnings call according to MarketWatch. In the first half of this year, wholesale orders came in lower than expected, driven we believe in part by tempered demand against last year’s spring/summer season.”

Revenue for the fourth quarter came in at just $1.44 billion, substantially below what was expected by analysts. To make things worse, Frisk told analysts in a conference call that sales could decline by a single-digit percent during the fiscal year. Well known financial pundits, such as Mad Money‘s Jim Cramer, have gone on to say that there isn’t any reason for anyone to own the stock at this time. Considering that Under Armour faces stern competition from the likes of giants like Nike (NYSE: NKE), it’s understandable why he would say that.

Other analysts, such as those from BMO Capital Markets, have downgraded the stock substantially with a price target of just $18 per share, barely above where the company is currently trading. Shares of Under Armour fell by 19% in response to the news. Most analysts prior to the announcement have held a neutral outlook on the stock, but it wouldn’t be surprising to see a slew of downgrades in the next 24 hours.

 

Under Armour Company Profile

Under Armour develops, markets, and distributes athletic apparel, footwear, and accessories in North America and other territories. Consumers of its apparel include professional and amateur athletes, sponsored college and professional teams, and people with active lifestyles. The company sells merchandise through wholesale and direct-to-consumer channels, including e-commerce and nearly 350 total factory house and brand house stores. Under Armour also operates digital fitness apps with more than 200 million users. The Baltimore-based company was founded in 1996. – Warrior Trading News

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