Shares of Under Armour Inc. (NYSE: UAA) took a beating in Tuesday’s premarket following the company’s fourth-quarter and full-year earnings release. Partly that’s due to lower-than-expected results and partly to the immediate departure of Chief Financial Officer Chip Molloy. On top of that, there’s a lusterless outlook.
For the quarter, Under Armour posted diluted earnings per share (EPS) of $0.23 on revenues of $1.3 billion. In the same period a year ago, the company reported EPS of $0.24 on revenues of $1.17 billion. Fourth-quarter results also compare to consensus estimates for EPS of $0.25 and $1.41 billion in revenues.
For the full year, the company reported EPS of $0.45 on class A and B shares and revenues of $4.8 billion, compared with 2015 EPS of $0.53 and revenues of $3.96 billion. Analysts had forecast EPS of $0.60 and revenues of $4.93 billion.
The company’s class C common stock (NYSE: UA) posted EPS of $0.71, including a special dividend paid to class C shareholders in the second quarter. Class C shares have no voting rights. The company’s founder and CEO Kevin Plank owns all class B shares.
In its outlook statement, the company said it expects net revenues to rise by 11% to 12% in fiscal 2017 to $5.4 billion on a currency neutral basis. Analysts were forecasting revenues at $6.05 billion. Strike one.
Gross margin is forecast slightly down from the 2016 level of 46.5%, itself down from 48.1% in 2015. The company blamed a number of things, but shoes took the brunt due to “the outperformance of the footwear and international businesses … carry lower margins than the apparel and North American businesses.” Strike two.
Operating income is forecast to drop from $420 million in 2016 to $320 million in 2017. Strike three.
CEO Plank said:
Looking forward, our successful track record of re-defining performance gives us great confidence that the opportunities for long-term growth at Under Armour have never been greater. The current environment represents an inflection point to maximize our unique strengths by staying on offense — investing smartly in innovation, deepening our Brand connection with consumers and amplifying our focus on operational excellence — positioning Under Armour as a stronger company.
Investors are not buying that. The shares traded down 27% in Tuesday’s premarket to $20.99, well below the 52-week range of $28.29 to $47.95. The consensus 12-month price target was $36.91 before results were announced.
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