Oct 31, 2017
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Under Armour slashes forecasts as North America slide worsens

Oct 31, 2017

Under Armour Inc slashed 2017 forecasts and reported its first quarterly fall in revenue since going public as the sportswear firm struggled against fierce competition from Nike and Adidas in North America.

Shares in the maker of Stephen Curry basketball shoes, already among the worst performing stocks on the S&P 500 in the past year, fell 16 percent to $13.82 in premarket trading.

Rival Nike also fell as did shares in several retail chains which sell Under Armour’s products -- Dick’s Sporting , Finish Line and Hibbet.

The sportswear maker struggled again in its biggest market, North America, as a lack of innovation coupled with an intensifying price war among retailers ate into profits.

One part of the company’s troubles is linked to the waning demand for athleisure fashion, where customers wear exercise clothing in both casual and formal environments.

Retail chains which stocked these items heavily not long ago are now reducing shelf space, spurring a 12 percent decline in wholesale revenue for Under Armour.

The repositioning of Adidas, an underdog only two years ago in North America, has also exacerbated Under Armour’s problems as the German firm won back customers with cleverly tweaked retro lines of shoes.

Under Armour’s revenue fell 4.5 percent year-on-year in the quarter ended Sept. 30, its first such decline since going public in 2005. The company also blamed “operational challenges” related to the upgrading of its IT systems for the drop in sales.

The Baltimore, Maryland-based company cut its forecast for the percentage rise in full-year revenue to the low single-digits from 9-11 percent earlier.

“This is now about more than external factors,” Neil Saunders, managing director of research house GlobalData Retail, wrote in a note.

“It demonstrates issues with the (Under Armour) brand and its proposition. Especially so since other brands and retailers... have not posted such calamitous figures.”

Under Armour’s shares still carries the highest valuation of the big global sportswear companies with its stock trading at 39.1 times forward earnings. Nike in contrast trades at 22.4 times, and Adidas at 24.7 times.

The company also said net income more than halved to $54.2 million, or 12 cents per Class C share, mainly due to an $85 million charge related to a previously announced plan to cut jobs and close stores.

Excluding items, the company earned 22 cents per share, topping an already downbeat analysts’ consensus by three cents, according to Thomson Reuters I/B/E/S.

It cut its full-year adjusted earnings forecast to 18 to 20 cents per share, compared to a previous 37 to 40 cents.

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