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Under Armour (UA) Lags Q4 Earnings & Sales, Shares Tank
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Under Armour, Inc. (UAA - Free Report) reported lower-than-expected financial numbers for the fourth quarter of 2016. The company reported earnings per share of 23 cents, missing the Zacks Consensus Estimate by a couple of cents and also declined 4.2% year over year.
Following the results, the company’s shares are down nearly 25% during pre-market trading session. In fact, the company’s shares have plunged 34.3% in the past one year, underperforming the Zacks categorized Textile-Apparel Manufacturing industry which has witnessed a decline of 16.6%.
Aided by continued strong performance of the Apparel, Footwear and Accessories categories, total revenue came in at $1,308.1 million, surging 11.7% year over year. However, the company’s top-line missed the Zacks Consensus Estimate of $1,412 million. Notably, this is for the first time in the last 27 quarters that the company’s has reported revenue growth of less than 20%.
The company, which competes with giants such as Adidas and Nike, Inc. in the sports apparel business, is keen on expanding its footprint and enhancing brand recognition to get an edge, and the deal with rising athletes provides it the suitable platform to showcase its brands.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour’s largest product category, Apparel, once again reported strong sales. Apparel sales jumped 7.4% to $928.5 million driven by growth in golf and basketball, while Footwear net revenue surged 36.4% to $227.7 million during the quarter, on the back of growth in running and basketball. Net revenue in the Accessories category advanced 7.4% to $104.3 million, backed by the bags and headwear category, while Licensing revenue rose 20.4% year over year to $29.9 million.
The company’s Connected Fitness segment reported year-over-year growth of 7.6% to $18.3 million. This was driven by the acquisitions of Endomondo and MyFitnessPal. These buyouts, along with its existing MapMyFitness and UA RECORD suite of applications, helped the company to form one of the largest digital health and fitness communities.
Under Armour recorded a 5% increase in wholesale net revenue to $742 million and a 23% increase in Direct-to-Consumer net revenue to $518 million. North America net revenue went up 6%, while international net revenue, which represented 16% of total net revenue, increased 55% or 60% on a currency neutral basis.
Gross profit was up 4.4% to $586.6 million. However, gross margin contracted 320 basis points to 44.8% owing to aggressive inventory management and foreign currency headwinds. Further, it can be attributed to better performance of footwear as well as international businesses in the overall mix, which has lesser margins in comparison to apparel and North American businesses.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $250.5 million, up 93% from the prior-year period, while total debt (including current maturities) was $817 million compared with $669 million in the prior-year period. Shareholders' equity at the end of the quarter was $2,032.6 million.
2017 Guidance
Management expects net revenue for 2017 to be nearly $5.4 billion. This represents an increase of 11% to 12% over the 2016 level. The company expects gross margin be down slightly year over year owing to foreign currency headwinds and better performance of footwear as well as international businesses in the overall mix, which has lesser margins in comparison to apparel and North American businesses. Due to increase in strategic investments Under Armour expects operating income to decline to nearly $320 million.
The company projects interest expense of about $40 million and effective tax rate of 32% to 34%.
Zacks Rank & Stocks to Consider
Under Armour currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the retail sector include Tailored Brands, Inc. , PVH Corp. (PVH - Free Report) and Lululemon Athletica Inc. (LULU - Free Report) . Tailored Brands sports a Zacks Rank #1 (Strong Buy), while both PVH and Lululemon Athletica carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Tailored Brands has a long-term earnings growth rate of 17.5% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 8.4%.
PVH has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 8.1% and has a long-term earnings growth rate of 10.7%.
Lululemon Athletica has an impressive long-term earnings growth rate of 15.9%.
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Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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Under Armour (UA) Lags Q4 Earnings & Sales, Shares Tank
Under Armour, Inc. (UAA - Free Report) reported lower-than-expected financial numbers for the fourth quarter of 2016. The company reported earnings per share of 23 cents, missing the Zacks Consensus Estimate by a couple of cents and also declined 4.2% year over year.
Following the results, the company’s shares are down nearly 25% during pre-market trading session. In fact, the company’s shares have plunged 34.3% in the past one year, underperforming the Zacks categorized Textile-Apparel Manufacturing industry which has witnessed a decline of 16.6%.
Aided by continued strong performance of the Apparel, Footwear and Accessories categories, total revenue came in at $1,308.1 million, surging 11.7% year over year. However, the company’s top-line missed the Zacks Consensus Estimate of $1,412 million. Notably, this is for the first time in the last 27 quarters that the company’s has reported revenue growth of less than 20%.
The company, which competes with giants such as Adidas and Nike, Inc. in the sports apparel business, is keen on expanding its footprint and enhancing brand recognition to get an edge, and the deal with rising athletes provides it the suitable platform to showcase its brands.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. Price, Consensus and EPS Surprise | Under Armour, Inc. Quote
Under Armour’s largest product category, Apparel, once again reported strong sales. Apparel sales jumped 7.4% to $928.5 million driven by growth in golf and basketball, while Footwear net revenue surged 36.4% to $227.7 million during the quarter, on the back of growth in running and basketball. Net revenue in the Accessories category advanced 7.4% to $104.3 million, backed by the bags and headwear category, while Licensing revenue rose 20.4% year over year to $29.9 million.
The company’s Connected Fitness segment reported year-over-year growth of 7.6% to $18.3 million. This was driven by the acquisitions of Endomondo and MyFitnessPal. These buyouts, along with its existing MapMyFitness and UA RECORD suite of applications, helped the company to form one of the largest digital health and fitness communities.
Under Armour recorded a 5% increase in wholesale net revenue to $742 million and a 23% increase in Direct-to-Consumer net revenue to $518 million. North America net revenue went up 6%, while international net revenue, which represented 16% of total net revenue, increased 55% or 60% on a currency neutral basis.
Gross profit was up 4.4% to $586.6 million. However, gross margin contracted 320 basis points to 44.8% owing to aggressive inventory management and foreign currency headwinds. Further, it can be attributed to better performance of footwear as well as international businesses in the overall mix, which has lesser margins in comparison to apparel and North American businesses.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $250.5 million, up 93% from the prior-year period, while total debt (including current maturities) was $817 million compared with $669 million in the prior-year period. Shareholders' equity at the end of the quarter was $2,032.6 million.
2017 Guidance
Management expects net revenue for 2017 to be nearly $5.4 billion. This represents an increase of 11% to 12% over the 2016 level. The company expects gross margin be down slightly year over year owing to foreign currency headwinds and better performance of footwear as well as international businesses in the overall mix, which has lesser margins in comparison to apparel and North American businesses. Due to increase in strategic investments Under Armour expects operating income to decline to nearly $320 million.
The company projects interest expense of about $40 million and effective tax rate of 32% to 34%.
Zacks Rank & Stocks to Consider
Under Armour currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the retail sector include Tailored Brands, Inc. , PVH Corp. (PVH - Free Report) and Lululemon Athletica Inc. (LULU - Free Report) . Tailored Brands sports a Zacks Rank #1 (Strong Buy), while both PVH and Lululemon Athletica carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Tailored Brands has a long-term earnings growth rate of 17.5% and has also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 8.4%.
PVH has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 8.1% and has a long-term earnings growth rate of 10.7%.
Lululemon Athletica has an impressive long-term earnings growth rate of 15.9%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>