Shares of Under Armour today "slid as the company posted an unexpected decline in quarterly profit and issued a disappointing sales forecast" for '17 as the company "struggled with its key North American business," according to Anne Steele of the WALL STREET JOURNAL. UA, which today also rolled out its first U.S.-made collection of apparel, "expects revenue to grow 11% to 12%" in '17 to about $5.4B, "sharply" below the $6.06B analysts have predicted. North America sales in Q4, which "make up more than 80% of the top line, grew 5.9%, while sales in the much smaller -- and lower-margin -- international business shot up 55%." Apparel sales rose 7.4% to $928.5M for the quarter, with "strength in golf and basketball." Footwear sales "surged 36%" to $227.7M, on "accelerated growth in running and basketball." Sales of accessories also grew 7.4%, to $104.3M, "lifted by bags and headwear." Direct-to-consumer revenue jumped 23% to $518M, as UA "launched three new e-commerce websites" during Q3. Meanwhile, UA said that CFO Chip Molloy has "decided to leave the company for personal reasons." UA Senior VP/Corporate Finance David Bergman will "serve as acting CFO," effective Friday (WSJ.com, 1/31). At presstime, shares of UA were trading at $19.61, down 21.8% from the close of business yesterday (THE DAILY).
STOPPED IN THEIR TRACKS: CNBC’s Becky Quick said the quarterly results from UA is a "huge surprise," as UA has "delivered better-than-expected earnings and earnings growth and revenue growth every single quarter." Quick: "It managed even through the financial crisis to continue to build on this, that’s why this is such a big shock to the street. One of the things they mentioned is the big issues in the retail environment. I'm trying to figure out what that means. I'm guessing Sports Authority and the bankruptcy there could have really thrown a wrench into things for them." Quick added, "You figure they must have to find new ways to really reach the consumer with some of the traditional retailers having such struggles" ("Squawk Box," CNBC, 1/31). CNBC’s Jim Cramer said, "When I see a CFO leave, that's often more important than pretty much anything else I follow.” Cramer added, "The numbers are just awful. ... But look, it’s retail. We’ve got to get it through our heads that retail’s awful.” CNBC’s David Faber said on the company’s conference call, there was a “more humble Kevin Plank than you would have seen in previous quarters.” CNBC’s Sara Eisen said UA is a “maturing business and potentially, they got a little ahead of their skis" ("Squawk on the Street," CNBC, 1/31).
LOOKING INTO THE FUTURE: FBR Capital Markets VP Susan Anderson said these quarterly results are “definitely a bit of a shock, but also maybe not so much a surprise given what we've seen out there just in terms of some oversupply in the athletic wear industry. ... But we are still seeing international growth over 50% and then also footwear, which I think was expected to be light, was still very strong, over 30%. So I think those are really the two growth platforms that we're going to start to see take hold over the next several years.” Anderson noted the announcement about Molloy leaving was a "bit of a surprise." Anderson: "He just recently came on board and was well liked by the street, but sounds like leaving on mutual terms. ... Good to hear he's sticking around in more of an advisory capacity for some time.” Anderson note UA stock is one to "own for the long-term." Anderson: "I like it over Nike. I think it's one that's still going to have double-digit topline growth, which is hard to find these days out there in retail or apparel and I think as we kind of get through some tough issues in the North America industry, I think it's going to come out a winner” ("Squawk Box," CNBC, 1/31). But Motley Fool's David Kretzmann tweeted, "Under Armour is not without its risks. Climbing debt load, weak/inconsistent cash flow, and questions w/ connected fitness strategy."
