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) Q4 and fiscal 2018 financial results and then dives into what’s next for the athletic apparel firm as its North American struggles continue.
Shares of Under Armour surged nearly 7% last Tuesday after the company surpassed fourth-quarter earnings and revenue estimates. The company’s international sales climbed and apparel popped 2%. But Under Armour saw its vital North American sales fall once again, which continued an alarming trend for the sportswear company.
Under Armour’s downturn in North America comes as rivals Nike (NKE - Free Report) and Adidas AG (ADDYY - Free Report) post strong growth in the region. On top of that, the company’s direct-to-consumer sales have been less than impressive as retailers big and small move toward a less wholesale-focused business in the Amazon (AMZN - Free Report) age.
The company has also failed to gain ground in the athleisure market as Lululemon (LULU - Free Report) , Gap (GPS - Free Report) , Puma, and newcomers like Austin, Texas-based Outdoor Voices see impressive growth. Plus, Under Armour has fallen behind many of its peers in terms of social media reach across outlets like Instagram (FB - Free Report) and Twitter (TWTR - Free Report) at a time when these platforms provide significant brand building opportunities and shopping capabilities.
Looking ahead, Under Armour executives maintained their fiscal 2019 top-line growth outlook of 3% to 4%, which they revised in December. But this could change as the Baltimore-based firm finds it hard to regain its edge in North America.
Overall, UAA stock is up roughly 24% in the last year, which tops its industry’s 19% climb. But shares of Under Armour are down 23% over the past five years and the stock is trading at 59X forward 12-month Zacks Consensus EPS estimates, which marks a massive premium compared to its industry’s average and some of its rivals.
In the end, Under Armour will be a fun company to watch as CEO Kevin Plank remains committed to his company’s original business at a time when the industry as a whole seems to be shifting.
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