Welcome to the latest episode of the Full-Court Finance podcast from Zacks Investment Research where Associate Stock Strategist Ben Rains breaks down Under Armour’s (UAA - Free Report) third-quarter financial results that helped its stock price surge near its 52-week high. The episode details the positives and dives into some worrisome signs for Under Armour as it struggles to grab market share from Nike (NKE - Free Report) , Adidas (ADDYY - Free Report) , and even Lululemon (LULU - Free Report) and other smaller rivals like Puma.
Under Armour stock skyrocketed last Tuesday after it reported its Q3 earnings results in its biggest single-day jump since October 2008. Shares of UAA have soared over the last year after they plummeted to roughly $13 per share when the Baltimore-based company reported its Q3 2017 financial results. Under Armour stock has surged over the last 12 months as investors react positively to its restructuring plan focused on global growth, streamed line product development, and much more.
Under Armour’s Q3 revenue climbed roughly 2% to $1.44 billion, which beat our $1.41 billion Zacks Consensus Estimate. Many investors were also likely pleased to see the company’s international business jump 15% to $351 million. Meanwhile, apparel sales jumped 4.2% to $978.4 million. Maybe more importantly, Under Armour’s adjusted quarterly earnings jumped 13.6% to reach $0.25 per share. This crushed our estimate of $0.12 per share.
However, key North American sales slipped 1.6% to touch $1.06 billion and overall footwear sales dipped marginally. Plus, Under Armour’s international growth is far less impressive than it has been recently and Q3 North American revenues were down big from the third quarter of 2016. UAA’s direct-to-consumer revenues also came in flat at a time when Nike, Adidas, Lululemon, and many other retailers have posted significant growth in this key category during the Amazon (AMZN - Free Report) age.
Under Armour has focused on reducing the number of SKUs and overall styles to become more streamlined. The company also lowered the number of promotional days in North America for a variety of reasons, one of which is to create more “brand heat” as it fights to become cool in the athleisure and footwear market where it has traditionally struggled.
Under Armour launched a throwback collection and rolled out a new Stitch Fix (SFIX - Free Report) -like service to try to spark more engagement and brand loyalty. But in the age of e-commerce and social media marketing Under Armour is light-years away from Nike in terms of brand presence on platforms such as Instagram (FB - Free Report) .
Looking ahead, some of Under Amour’s outlook appears optimistic, while other signs point to weakness. In the end, the company needs to expand internationally and return to growth in its most important region. With that said, it seems unclear if Under Armour’s current initiatives will help the company get where it hopes to be.
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