Under Armour Is Not Sports Authority's Only Victim

Companies and Brands

Published: June 1, 2016 1:25 pm

Last Updated: January 13, 2020 7:19 am

The bankruptcy and liquidation of Sports Authority has probably had more impact on the sporting goods market that anything the company has done recently. In an earnings warning issued Tuesday, Under Armour Inc. (NYSE: UA) said it expects to take a $23 million impairment charge in the second quarter due to the demise of Sports Authority, and Under Armour revised its guidance accordingly.

A couple of weeks ago, Dick’s Sporting Goods Inc. (NYSE: DKS) said the liquidation of Sports Authority forced it, too, to revise its guidance, citing a glut of cheap sporting equipment about to hit the market. Dick’s forecast same-store sales to fall in a range of −1% to −4% in the quarter and earnings per share in a range of $0.62 to $0.72. Analysts had been looking for earnings of $0.78 per share.

For Under Armour the problem is getting paid for goods it delivered, and revising estimates of future sales. In addition to the $23 million second-quarter charge the company was able to recognize just $43 million of planned $163 million in revenues from Sports Authority this year.

When Under Armour reported first-quarter earnings, it forecast full-year revenues of $5 billion, up 26% year over year. On Tuesday the company cut that estimate to approximately $4.925 billion. The company has also cut its forecast for operating income in a prior range of $503 million to $507 million to a new range of $440 million to $45 million.

Perhaps the most interesting turn of events revolves around naming rights for the NFL’s Denver Broncos stadium, now called Sports Authority at Mile High. The Broncos have filed a motion to sever ties with the company, and two marijuana-related businesses in the state, where recreational sales of pot are legal, have offered to pay $6 million a year for naming rights.

Denver and the state of Colorado have insisted on retaining the “Mile High” designation in the stadium’s name, but the oh-so-politically correct NFL is unlikely to get behind a Native Roots at Mile High or O.penVAPE at Mile High.