On Monday, sports gear maker Under Armour Inc. (NYSE: UAA) announced that it was launching a new “legacy” brand bearing the name of Steph Curry, star point guard for the NBA’s Golden State Warriors. The Curry Brand includes footwear, apparel and accessories and will be available to consumers Tuesday, December 1.
Since announcing third-quarter results on October 30, Under Armour shares added nearly 23% through last Tuesday, before dropping about three points as of Monday’s close. For the year to date, shares are off by about 23%, a sharp improvement from a trough of 64% in mid-May.
But what’s fueling the rise? The company’s earnings per share (EPS) for the first nine months of the 2020 fiscal year are −$1.62 on a GAAP basis, including impairment and restructuring charges totaling $1.21 per share. The company’s operating loss for the first nine months of the year totaled nearly $120 million, not including the restructuring and impairment charges.
For all of 2020, Under Armour is expected to see a sales decline of around 18%, which would be a slight improvement from a decline of 19.7% through the first three quarters. The company itself estimates that revenue will decline by a high-teen percentage rate year over year with a decline of more than 20% in North America.
The company forecast an operating loss for the year of $800 to $860 million, including restructuring and impairment charges and $140 to $150 million excluding the charges. The full-year adjusted loss per share is forecast at $0.47 to $0.49.
In mid-November, independent research firm Argus raised its rating on Under Armour from Hold to Buy and put a $20 price target on the stock. Among the reasons the analysts gave for raising the rating was that Under Armour stock traded at just 10 times the Argus’s preliminary EPS estimate for 2022.
The launch of Under Armour’s Curry Brand comes right at the point when sneaker sales take off for the holidays. And this year, Nike Inc. (NYSE: NKE) has two new shoes coming in its Air Jordan brand, and both are expected to be strong sellers following the ESPN documentary about Michael Jordan and the Chicago Bulls 1997–1998 NBA championship season.
In addition to the Air Jordans, Nike also created a shoe earlier this year with ice-cream maker Ben & Jerry’s. The Chunky Dunky was released in late May at a price of $100, sold out overnight and promptly appeared at online stores for up to $2,000 a pair. If you missed out on a pair of sneakers, it’s not too late to hit Etsy for some Chunky Dunky gear.
Sales of Curry Brand gear will help support sports programs funded by Under Armour and Curry. As valuable as that is, Under Armour needs to focus on returning to profitability, and given the competition, that’s not going to be easy.
Under Armour stock closed at $16.57 on Monday, down about 0.7% for the day in a 52-week range of $7.15 to $21.96. The stock’s consensus 12-month price target is $13.86.
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