Production Delays In Asia Weighing On Under Armour's Curry 4 Release

The Golden State Warriors are one of the world’s best-known sports franchises. The NBA champions are tapping into their international fan base, particularly in Asia, where the team recently played two exhibition games in Shenzhen and Shanghai China.

“Because we’ve got really marketable players and a really marketable brand, I think it gives us an advantage if we’re strategic about it,” Golden State Warriors CMO Chip Bowers told The Mercury News

Going Overseas

Under Armour Inc UAA is also piggybacking on Golden State’s overseas trip to promote the release of Steph Curry’s latest shoe, the Curry 4, which was released during the team’s time to China.

Under Armour has been currying favor in Asia, where the brand took a trip with their star endorser in July, as it has the past three years, to win over fans in the world’s most populated nation.

The Baltimore-based company knows the Curry 4 is an important release, especially with shoe sales in focus after falling out of favor. When the Curry 4 was unveiled during the NBA Finals in June, it received a more favorable reception than any previous release.

Still, Canaccord Genuity analyst Camilo Lyon lowered his price target on Under Armour from $18 to $15, citing footwear production delays. The firm maintains a Hold rating on the stock.

Air Freight Impact

Delays have forced the company to air freight the product during the quarter to meet delivery schedules, which ultimately will cut into gross margins, as the cost of air freight is significantly higher. As much as $5-$10 per pair of shoes 10-20 times more than the cost to ship by boat.

Under Armour already has footwear margins below industry average, meaning the unexpected cost could wipe out footwear gross profits in Q3, and ultimately pressure the company’s fourth quarter revenue guidance of low to mid-20s growth.

“Simply put, we believe UAA’s Q4 guidance is far too aggressive and will likely be lowered,” said Lyon.

Although the analyst applauded the company’s new sportswear line, the Unstoppable collection, in Under Armour’s move to break into a broader lifestyle assortment, the limited release does little to alter the performance heavy image of the brand.

Combined with the fact that Nike Inc NKE is in an unprecendeted promotional stage, Under Armour’s 2018 performance will rely more on International growth more than ever before.

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