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Under Armour Updates '18 View, Provides Long-Term Plans
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Under Armour, Inc. (UAA - Free Report) yesterday revised 2018 outlook and provided initial projections for 2019 as well as growth targets for 2023. We note that bleak projections for the North American business for 2019 were a disappointment. This dented investors’ optimism as the stock lost 10.4% on Dec 12. Yesterday’s decline also compelled the company’s shares to fall 12.3% in the past month compared with the industry’s decrease of 10.4%.
Let’s now take a closer look at the management’s updated forecast.
A Look at the Revised View for 2018
Under Armour expects gross margin to stay flat compared with 2017 levels. Previously, the company expected gross margin in the range of flat to down slightly. On an adjusted basis, gross margin is expected to improve between 20 basis points (bps) and 30 bps. The company estimates operating loss in the range of $40-$55 million compared with previous projection of $50-55 million. Adjusted operating income is expected in the band of $160-$165 million compared with the earlier view of $150-$165 million.
Further, management raised the lower end of 2018 bottom-line view. Adjusted earnings are now expected in the range of 21-22 cents per share compared with the prior view of 19-22 cents. The Zacks Consensus Estimate for 2018 earnings is currently pegged at 22 cents.
We note that in 2017, the company’s adjusted earnings were 19 cents. Also, management expects inventory to be down in mid-single-digits compared with the previous expectation of flat to slightly down.
View for 2019: Persistent Weakness in North American
Management expects revenues from North America to remain flat year on year in 2019. We note that Under Armour’s North American operations have been struggling. In fact, the company has been reporting sluggish sales in the region since fourth-quarter 2016. Bankruptcies, store closures, fall in productivity and demand as well as change in fashion preferences are major causes for the dismal show.
As for the international business, the company predicts low double-digit percentage increase in 2019. Considering these aspects, revenues are expected to rise 3-4%.
Further, gross margin for 2019 is expected to rise 60-80 bps, backed by channel mix gains, increased direct-to-consumer sales and favorable product costs. Additionally, operating income is expected in the range of $210-$230 million and interest expenses as well as other expenses are projected to be $40 million. Tax rate is expected in the band of 19-22%. Earnings for the year are expected in the range of 31-33 cents. Also, capital expenditures are projected at $210 million.
Management Efforts & Plans for 2023
To ensure business growth in the next five years, management has set certain long-term strategic plans. The company plans to focus on innovation to introduce improved athletic products. Further, to harness benefits from growth areas, the company intends to consistently invest in the direct-to-consumer, international, women's and footwear businesses.
Management also projects the digital platform to boost performance and plans to enhance digital engagement. It also intends to protect the distribution channel by adopting selective, optimal and premium wholesale distribution. Apart from these, this Zacks Rank #2 (buy) company is striving to boost profitability through cost efficiencies and invest in strategic alternatives.
Based on such strategic plans, the company expects the top line to increase in low double-digit rate in 2023. Further, earnings per share are expected to advance 40% on a five-year compounded annual growth rate basis.
All said, we believe that such well-chalked efforts will aid the company to expand its business and revive price performance.
Looking for Consumer Discretionary Stocks? Check These
Columbia Sportswear Co. (COLM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), delivered an average positive earnings surprise of 79.9% in the trailing four quarters. The company has a long-term earnings growth rate of 10.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
lululemon athletica inc. (LULU - Free Report) , with a Zacks Rank #2, came up with an average positive earnings surprise of 19.4% in the trailing four quarters. It has long-term earnings growth rate of 19.3%.
Ralph Lauren Corp. (RL - Free Report) , carrying a Zacks Rank #2, has a solid earnings surprise history. The company has a long-term earnings growth rate of 10.3%.
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Under Armour Updates '18 View, Provides Long-Term Plans
Under Armour, Inc. (UAA - Free Report) yesterday revised 2018 outlook and provided initial projections for 2019 as well as growth targets for 2023. We note that bleak projections for the North American business for 2019 were a disappointment. This dented investors’ optimism as the stock lost 10.4% on Dec 12. Yesterday’s decline also compelled the company’s shares to fall 12.3% in the past month compared with the industry’s decrease of 10.4%.
Let’s now take a closer look at the management’s updated forecast.
A Look at the Revised View for 2018
Under Armour expects gross margin to stay flat compared with 2017 levels. Previously, the company expected gross margin in the range of flat to down slightly. On an adjusted basis, gross margin is expected to improve between 20 basis points (bps) and 30 bps. The company estimates operating loss in the range of $40-$55 million compared with previous projection of $50-55 million. Adjusted operating income is expected in the band of $160-$165 million compared with the earlier view of $150-$165 million.
Further, management raised the lower end of 2018 bottom-line view. Adjusted earnings are now expected in the range of 21-22 cents per share compared with the prior view of 19-22 cents. The Zacks Consensus Estimate for 2018 earnings is currently pegged at 22 cents.
We note that in 2017, the company’s adjusted earnings were 19 cents. Also, management expects inventory to be down in mid-single-digits compared with the previous expectation of flat to slightly down.
View for 2019: Persistent Weakness in North American
Management expects revenues from North America to remain flat year on year in 2019. We note that Under Armour’s North American operations have been struggling. In fact, the company has been reporting sluggish sales in the region since fourth-quarter 2016. Bankruptcies, store closures, fall in productivity and demand as well as change in fashion preferences are major causes for the dismal show.
As for the international business, the company predicts low double-digit percentage increase in 2019. Considering these aspects, revenues are expected to rise 3-4%.
Further, gross margin for 2019 is expected to rise 60-80 bps, backed by channel mix gains, increased direct-to-consumer sales and favorable product costs. Additionally, operating income is expected in the range of $210-$230 million and interest expenses as well as other expenses are projected to be $40 million. Tax rate is expected in the band of 19-22%. Earnings for the year are expected in the range of 31-33 cents. Also, capital expenditures are projected at $210 million.
Management Efforts & Plans for 2023
To ensure business growth in the next five years, management has set certain long-term strategic plans. The company plans to focus on innovation to introduce improved athletic products. Further, to harness benefits from growth areas, the company intends to consistently invest in the direct-to-consumer, international, women's and footwear businesses.
Management also projects the digital platform to boost performance and plans to enhance digital engagement. It also intends to protect the distribution channel by adopting selective, optimal and premium wholesale distribution. Apart from these, this Zacks Rank #2 (buy) company is striving to boost profitability through cost efficiencies and invest in strategic alternatives.
Based on such strategic plans, the company expects the top line to increase in low double-digit rate in 2023. Further, earnings per share are expected to advance 40% on a five-year compounded annual growth rate basis.
All said, we believe that such well-chalked efforts will aid the company to expand its business and revive price performance.
Looking for Consumer Discretionary Stocks? Check These
Columbia Sportswear Co. (COLM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), delivered an average positive earnings surprise of 79.9% in the trailing four quarters. The company has a long-term earnings growth rate of 10.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
lululemon athletica inc. (LULU - Free Report) , with a Zacks Rank #2, came up with an average positive earnings surprise of 19.4% in the trailing four quarters. It has long-term earnings growth rate of 19.3%.
Ralph Lauren Corp. (RL - Free Report) , carrying a Zacks Rank #2, has a solid earnings surprise history. The company has a long-term earnings growth rate of 10.3%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>