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Volume 25 No. 212

Finance

Under Armour beat profit and sales estimates in Q4, as the company said that its "turnaround plan is working," according to Lorraine Mirabella of the BALTIMORE SUN. Sales for the sports apparel maker rose 2% to $1.4B, up from $1.37B in Q4 '17. The company reported net income of $4M, compared with a loss of $87.9M in the last three months of '17. For the full year, sales rose 4%, as UA posted a net loss for '18 of $46M. On an adjusted basis, the company said it earned $122M. The brand "continued to struggle in its key U.S. market," with sales down by 6%, but its international business "remained a strong growth driver." Apparel sales for the quarter "inched up" 2% to $970M, with growth in the training category. Footwear sales, a "key growth focus for the brand," fell 4% to $235M. Reflecting the "results of its restructuring, the company saw improvements in its gross profit margin." UA "highlighted new product releases" such as its "line of signature basketball shoes" promoted by Stephen Curry. UA expects sales to grow 3-4% this year (BALTIMORESUN.com, 2/12). The WALL STREET JOURNAL’s Khadeeja Safdar noted UA has been “restructuring its operations to cut spending and inventories as well as reduce promotions” after demand for its products “slowed in recent years.” The results of this were “largely in line” with an update the company gave investors in mid-December, but “lag behind the performance of rivals” like Nike and Adidas (WSJ.com, 2/12).

TAKING STOCK: Oppenheimer Senior Equity Research Analyst Brian Nagel said the UA results are “mixed,” as there are “very weak spots within the revenue line, particularly North America.” Some of that is "probably self-inflicted." Nagel: "This company has been in this two-year repositioning turnaround, they pulled back significantly on promotions, they've streamlined their operations. ... They’re positioning for better growth." CNBC’s Becky Quick: “The problem with Under Armour to begin with was that they were in too many outlets, too many places where they were being discounted essentially and they didn't differentiate between the levels of the brands.” Nagel: “It's also a company that just grew too fast.” Nagel said UA has “battened down the hatches and from an internal perspective they've done quite a good job" (“Squawk Box,” CNBC, 2/12). SW Retail Advisors President Stacey Widlitz said, “We’ve seen Under Armour go through a phase where they’ve cleaned out their inventory so give them kudos for that.” But in Q4 UA was “still incredibly promotional” (“Worldwide Exchange,” CNBC, 2/12). CNBC's Jim Cramer UA Founder, Chair & CEO Kevin Plank is “doing a good job, but the fact is, what have you done for me lately.” Plank is in an industry where there is "one company that is dominant and they’re not going away." Cramer: "Nike just has the great players, they’ve got real momentum. It’s just a tough business to be in the same (industry) as Nike"(“Squawk on the Street,” CNBC, 2/12). At presstime, shares of UA were trading at $22.23 per share, up 6.98% from the close of business yesterday (THE DAILY).

Tsai is said to be encouraged by lacrosse's growth in popularity and Rabil's leadership
Photo: GETTY IMAGES

Paul Rabil's Premier Lacrosse League has a "new high-profile backer," as the upstart effort "just closed a Series A funding round" that was led by Alibaba co-Founder Joe Tsai, according to Scott Soshnick of BLOOMBERG NEWS. Tsai is "joined in the investment" by Hildene Capital Management President Brett Jefferson and the Raine Group, which "led the league’s initial round in September." Terms of the latest financing deal "weren’t disclosed." The investors are "betting that growing demand for live sports" can help "sustain a new league." PLL players will be "full-time employees, and they’ll receive health benefits, performance incentives and an undisclosed equity stake in the organization." Tsai said that he is "encouraged by the sport’s growing popularity." Tsai believes Rabil & Co. "can bring lacrosse into the mainstream consciousness." The league "hasn’t announced where its teams will play." Cities "being considered" include Baltimore, Boston, Chicago, Dallas, Houston, L.A., N.Y., Philadelphia, S.F, Seattle, Toronto and Vancouver (BLOOMBERG NEWS, 2/12). Tsai is also owner of the NLL San Diego Seals and has a 49% stake in the Nets (THE DAILY).