Under Armour's Concerns Likely To Be Ongoing Post Q2 Results

Buckingham Research Group’s Scott Krasnik doubts Under Armour Inc UAA investors will see much indication of an end to the retail slump when the company reports its second-quarter results on Aug. 1.

Krasnik reiterated an Underperform rating and $15 price target on the stock, a 26-percent downside from Monday’s close.

Krasnik noted that despite the already negative sentiment surrounding the company, with 30 percent of shares short, investors will likely continue to grow bearish.

Under Armour’s growth has slowed significantly, and Krasnik estimates that U.S. wholesale sales excluding new distribution is actually declining.

“This should have negative implications on [Under Armour]'s sales and margins through, at least, fiscal 2018,” said Krasnik.

Among the reasons for his bearish view, Krasnik cited:

• A shift among consumers away from athletic apparel as fashion.
• Brand dilution due to “new lower quality distribution.”
• Limited margin expansion as the company invests $10 billion in infrastructure.
• Emerging footwear headwinds for the long-term.
• An unchanging, high P/E despite other risks.

Investors looking for signs of hope for the company should listen for details regarding new distribution through Caleres Inc CAL’s Famous Footwear stores and DSW Inc. DSW.

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