Companies and Brands

How Under Armour Whiffed on Earnings

Chris Lange

Published: July 26, 2016 12:50 pm

Last Updated: January 13, 2020 5:16 am

Under Armour Inc. (NYSE: UA) reported its second-quarter financial results before the markets opened on Tuesday. Although earnings were mixed, the stock took a sharp turn downward. The company said that it was further hurt on the bottom line by $0.03 per share from the liquidation sales at Sports Authority. However, Under Armour is still having a better year than Nike Inc. (NYSE: NKE), but still trailing Lululemon Athletica Inc. (NASDAQ: LULU).

Under Armour said that it had $0.01 in earnings per share (EPS) on $1.00 billion in revenue. The consensus estimates had called for $0.03 in EPS on revenue of $1.00 billion. In the same period of last year, it posted EPS of $0.03 and $783.6 million in revenue.

Based on current visibility, Under Armour expects 2016 net revenues of approximately $4.925 billion, representing growth of 24% over 2015, and 2016 operating income in the range of $440 million to $445 million, representing year-over-year growth of 8% to 9%.

Gross margin for the second quarter of 2016 was 47.7%, down from 48.4% in the same period of last year, primarily reflecting negative impacts of a sales mix driven by strong growth in footwear and international, but partially offset by improved product cost margins.

In June, Under Armour paid a $59 million stock dividend to the holders of Class C common stock in the form of roughly 1.47 million shares. Keep in mind the company has a total market cap of $27 billion.

Kevin Plank, chair and chief executive of Under Armour, commented on earnings:

The strong broad-based results posted this quarter highlight the continued demand for the Under Armour brand around the world. It also underscores the importance of diversifying our business and driving a sharper point of view with our consumers wherever they shop. In our largest category of apparel we continue to add more dimension with a sport category focus and we remain incredibly proud of the success of our international and footwear growth drivers. With the opening of 60 new international Under Armour stores so far this year, including doors on two new continents this quarter, our international business continues to expand and to resonate with the global athlete. The Stephen Curry signature line has continued to drive strong momentum for the brand and our pinnacle football product, the Highlight Cleat, continues to lead the market.

On the books, Under Armour’s cash and cash equivalents totaled $121 million at the end of the quarter, versus $149 million in the same period of last year.

Shares of Under Armour were trading down about 3.4% at $42.09 on Tuesday, with a consensus analyst price target of $53.62 and a 52-week trading range of $31.61 to $52.94. Excluding Tuesday’s move, the stock is up 8% year to date.

Nike shares were trading at $56.83. The consensus price target is $66.15, and the 52-week range is $47.25 to $68.19. Nike has underperformed the broad markets with the stock down 8% year to date.

Lululemon was trading at $77.38, with a consensus price target of $71.45 and a 52-week range of $43.14 to $78.49. Its shares are up nearly 50% year to date.