Why Under Armour’s Q3 Is Scaring Investors

By Chris Lange Published Oct 31, 8:55AM EDT

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It’s starting to get real spooky at Under Armour Inc. (NYSE: UAA) after it reported its third-quarter financial results before the markets opened on Tuesday. Mixed results were not enough to spark a rally. In fact, guidance only added to Under Armour’s misery.

It didn’t seem like things could get worse after the year that Under Armour has suffered through so far, but here we are. What makes this report especially scary is that the consistent revenue growth that Under Armour is known for is nowhere to be seen.

The company said that it had $0.22 in earnings per share (EPS) and $1.41 billion in revenue. That compared with consensus estimates from Thomson Reuters of $0.19 in EPS on $1.48 billion in revenue. In the same period of last year, Under Armour said it had EPS of $0.29 and $1.47 billion in revenue.

In terms of its segments the company reported:

Apparel revenues dropped 8% year over year to $939.4 million.
Footwear revenues rose 2.2% to $285.1 million.
Accessories revenues rose 1.4% to $123.5 million.

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Looking ahead to the 2017 full year, Under Armour expects EPS to be in the range of $0.18 to $0.20, which is about half what the firm told investors back in August. Net revenues are expected to grow at a low single-digit percentage rate, reflecting lower North American demand and operational challenges.

The consensus estimates call for $0.37 in EPS and $5.22 billion in revenue for the 2017 full year.

Kevin Plank, Under Armour board chair and chief executive, commented:

While our international business continues to deliver against our ambition of building a global brand, operational challenges and lower demand in North America resulted in third quarter revenue that was below our expectations. Based on these issues in our largest market, we believe it is prudent to reduce our sales and earnings outlook for the remainder of 2017.

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Plank added:

Against this difficult backdrop, our management team is working aggressively to evolve our strategy and level of execution to proactively address these challenges. We understand that success in our next chapter requires managing with focused financial discipline and driving excellence into every area of our business while we amplify innovation, deliver fresh product and connect even more deeply with our consumers.

Shares of Under Armour closed Monday at $16.41, with a consensus analyst price target of $18.07 and a 52-week range of $15.52 to $33.45. Following the release, the stock was down about 16% at $13.75 in early trading indications Tuesday.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.