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Kevin Plank Tries To Quash Investor Fears After Under Armour Experiences Slow Sales Growth

Under Armour Founder, Chair & CEO Kevin Plank yesterday "attempted to quash investor fears" as UA's stock fell, "saying the company is still growing fast just not at a pace as previously projected," according to Holden Wilen of the BALTIMORE BUSINESS JOURNAL. UA CFO Chip Molloy told analysts yesterday the company "expects to reach" a stated $7.5B revenue goal by '18. However, it "won't reach its operating income goal" of $800M "because of a slowdown in North American apparel growth." Plank said, "The growth remains intact, it just costs more short-term investment dollars to achieve. We are in this for the long haul and the opportunity that we see is to be the best in the world." Plank added that investing in the future "could mean short-term hits" to UA's margins. Plank said that UA will pass its '16 goal of 190 million registered users on its Connected Fitness platform "by the end of this week" (BIZJOURNALS.com, 10/25).

MOVING FORWARD: INVESTOR'S BUSINESS DAILY's Elaine Low noted Plank sounded "agitated at times during the earnings call." Plank: "We're not saying we're losing money, we're moving and marching forward." Low noted UA's footwear and international segments are "performing better than the management expected" (INVESTORS.com, 10/25). BLOOMBERG NEWS' Shelly Banjo noted the "defensive tone" Plank took on the call suggests UA prioritizing tech and building better direct-to-consumer business "isn't just a high-minded strategy shift, but a necessary reaction to slowing sales at U.S. retailers" (BLOOMBERG NEWS, 10/25). Molloy said that going forward he "expects annual operating income growth in the mid-teens, while the company invests in fast-growing areas such as footwear, international markets and branded stores and websites" (Baltimore SUN, 10/26).

PRIORITY LIST: CNBC contributor Pete Najarian said what is “most important" in the long-term for Plank is "footwear, and he wants international." Najarian: "As of right now, that’s where you’re seeing growth.” Najarian said international and footwear growth are "off the charts,” but the “problem is that’s still a very small segment of what Under Armour is.” CNBC contributor Joe Terranova said Plank has been “consistent to his shareholders in delivering the message of what the strategy is going to be. This isn’t a management strategy problem. This is about shifting the growth strategy ... and going into other businesses where there is opportunity” ("Fast Money Halftime Report," CNBC, 10/25). CNBC's Michael Santoli said athleisure as a cultural phenomenon "might be cresting, and it doesn't mean it's terrible for Under Armour." Santoli: "A hyper-growth company downshifting to a very fast growth company is not a terrible thing. It's just the stock wasn't priced for it" ("Closing Bell," CNBC, 10/25).

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