Under Armour Stock Is Finally Catching a Break

By Seth McNew Markets Fool.com

What happened

Continue Reading Below

Shares ofUnder Armour (NYSE: UA)(NYSE: UAA)are rising today, up as much as 12% at one point in early trading, after the company released its first-quarter earnings, which showed struggling sales growth and its first-ever net loss as a public company. Results, however, were still better than many analysts feared.

So what

For the first quarter, Under Armour's sales grew 7% year over year, a sharp decline from the 30% growth posted as recently as Q1 2016. The company also reported a net loss of $2 million for the quarter, or $0.01 per share, compared to a net income of $19 millionin the same quarter last year.

There are multiple issues that could be blamed for Under Armour's current situation, including increased competition and management missteps. One particularly concerning point of today's results is that footwear sales, which had been rising over 50% year over year in recent quarters and was considered a major opportunity, grew just 2% over Q1 2016. Additionally, gross margin continued to drop due to increased discounting.

Image source: Under Armour.

Continue Reading Below

Now what

While revenue was up only 7% companywide because of sluggish North American sales that make up the bulk of its sales, Under Armour did continue to grow quickly internationally in key markets. For example, sales were up 60% in Asia over Q1 2016 and up 55% in the EMEA region (Europe, the Middle East, and Africa). International sales in total were up more than 50% year over year, and now make up 20% of total sales -- which the company is seeking to drive higher as it tries to reignite sales growth.

Under Armour is also looking toward new retail partnerships to move more product, including gear that started selling in Kohl's stores last month, and will start selling in DSW shoe stores this fall. Management said there are no changes to its previous guidance and that it still expects full-year 2017 revenue growth of 11%-12%.

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 April 3, 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 recommends DSW. The Motley Fool has a disclosure policy.