Back to top

Image: Bigstock

This is Why Under Armour (UAA) is Crashing After Earnings

Read MoreHide Full Article

On Tuesday, shares of athletic retailer Under Armour (UAA - Free Report) are crashing, down almost 24% in morning trading after the company reported disappointing fourth quarter fiscal 2016 financial results.

Under Armour reported earnings per share of 23 cents, missing the Zacks Consensus Estimate of 25 cents per share for Class A, Class B, and Class C shares. Net income fell to $104.9 million in the quarter, down from $105.6 million a year earlier.

Total revenues came in at $1.3 billion, which also missed our consensus estimate of $1.412 billion but increased 12% year-over-year thanks to a 5% bump in wholesale revenues to $742 million, as well as a 23% increase in direct-to-consumer revenues to $518 million.

A big reason for UAA’s downward movement today is slowing growth in North America, where revenues only grew 6%. In comparison, international revenues, which reflected 16% of total revenues, were up 55% (driven by significant growth in the U.K., Germany, China, and Australia). Apparel revenues grew 7% thanks to strength in golf and basketball; footwear revenues increased 36% due to running and basketball; and accessories revenues increased 7% with strength in bags and headwear.

"We are incredibly proud that in 2016, we once again posted record revenue and earnings, however, numerous challenges and disruptions in North American retail tempered our fourth quarter results," said Kevin Plank, Under Armour Chairman and CEO.

Gross margin was 44.8% compared with 48% in the prior year’s period, while operating income declined 6% to $167 million.

Another huge factor for Under Armour’s poor stock performance today is its new lowered 2017 outlook. The company expects net revenues to grow 11% to 12% to reach nearly $5.4 billion. Wall Street analysts had expected $6.05 billion and 20% year-over-year growth. Gross margin is expected to be slightly down as well, while this lowered sales guidance, combined with strategic investments in Under Armour’s fastest growing businesses, is expected to cause a decline in operating income to roughly $320 million.

Under Armour also announced that CFO Chip Molloy is leaving effective February 3 for "personal reasons."

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank.  Be among the very first to see it>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Under Armour, Inc. (UAA) - free report >>