Why Shares of Under Armour Are Getting Crushed Today
Image source: Under Armour.
What happened
Shares of Under Armour(NYSE: UAA)(NYSE: UA) have taken a beating today, down around 25% as of noon E.T. after the company reported earnings below analyst expectations, which has led to a series of downgrades already.
So what
For the fourth quarter ended Dec. 31, Under Armour reported sales growth of just 12% year over year -- breaking its 26-quarter streak of at least 20% sales growth. For the full year, the company reported sales growth of 22% over 2015,and net income up 11%. For 2017, the company now expects sales to rise just 11%-12% over 2016. Multiple firms have downgraded the stock today, with concerns including the departure of CFO Chip Molloy after one year in that role.
The results of the quarter and the stock market's reaction were largely the same for the third quarter announced in October, especially because CEO Kevin Plank went on to say then that the company wouldn't reach a previously stated goal of $800 million in earnings by 2018 because of heavy investments in new growth areas. That story is harder to tell now that sales growth is also decreasing. As a result of both stock market beatings, Under Armour stock is now down around 45% the last six months.
Now what
Under Armour did have some bright spots in its earnings release that bode well for future growth prospects. Footwear sales grew 50% in 2016, and is now nearly a fifth of the total business. International sales rose 63% over 2015. Additionally, the company's new partnership with Kohl's will begin this year, which could help Under Armour's fledgling North American retail segment pick up.
The stock has always been a long-term story, and that's true now more than ever. Under Armour certainlyfaces some other daunting challenges, from increased competition to its growing debt load. Still, for investors who are willing to sit through five or 10 years of continued volatility, this cheaper stock could be a buying opportunity.
10 stocks we like better than Under Armour (A Shares) When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Under Armour (A Shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of January 4, 2017
Seth McNew owns shares of Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool owns shares of and recommends Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool has a disclosure policy.