Under Armour Inc (UAA)

[JohnCM]

Buy. Limit $12.99 or better.

[///M3]

UAA still trading at p/e of 41 with competition Nike at 23 and adidas at 36 with a stall in growth no I wouldn’t say undervalued at this time.

[JohnCM]

[Kilmal]

$1.4B X 4 = a $5.6B company.

Per OTCMARKETS.COM:

Market Value $2,356,402,266

Would it be accurate to say $UAA is undervalued???

[JohnCM]

[AnG5640]

Sounds like a good plan!

[JohnCM]

1/3 or 1/2 position now and stop at $11.50

[AnG5640]

Kinda looks like it’s found a bottom.... but I’m not quite convinced just yet..

[JohnCM]

[JohnCM]

If we can just hold right here, as opposed to falling into single digits as many SA contributors suggest.

[PNYSTKB]

The Rock has a new release in 5 days as well.

[DR. EVIL]

Thanks.

[JohnCM]

Use stops. Take 1/3rd position and watch. I expect a small MLB bump.

[DR. EVIL]

Should I buy? There’s blood in the streets

[JohnCM]

Under Armour to make MLB uniforms in 2019, a year early

May 19, 2017 ESPN.com news services

NEW YORK -- Under Armour and Fanatics will take over for Majestic and Nike as the official uniform partners for Major League Baseball in 2019, a year earlier than previously scheduled.

Under Armour, Fanatics' uniform deal announced

The on-field deal between MLB, Under Armour and Fanatics is scheduled to begin in 2020 and run for 10 years, but sources say it could start before that should Majestic decide to bow out early.

Under the terms of the deal, Under Armour will make all on-field apparel, including jerseys and game-day and training outerwear, that is currently made by Majestic, and base-layer gear that is made by Nike.

Fanatics, the largest sports retailer, will make the merchandise that will be sold to fans, serving as both the producer and the seller.

Fanatics Inc. and MLB announced an agreement in December that gave the company licensing rights to manufacture and distribute merchandise starting in 2020. Fanatics signed a deal last month to buy VF Corp.'s Licensed Sports Group and with it the 600-worker Majestic Athletic plant in Easton, Pennsylvania, where team jerseys and fan apparel are manufactured.

Baseball Commissioner Rob Manfred said Thursday that fan merchandise from Under Armour will be available next year and that Under Armour will be worn for dugout clothing during the 2018 postseason. The full switch to Under Armour for on-field apparel will take place for the 2019 season.

Majestic has manufactured MLB batting practice jerseys since 1982 and has been the exclusive supplier of game uniforms since 2005. Before that, uniforms were manufactured by both Majestic and Russell.

[PNYSTKB]

This will help eventually

http://www.espn.com/mlb/story/_/id/19416990/under-armour-make-mlb-uniforms-2019-year-earlyhttp://es.pn/2pSL50e

[JohnCM]

Under Armour Continues To Fall Behind

Nov. 3, 2017 11:58 AM ET
Brent A. Miller - SA

Under Armour reported a revenue decrease of -5% to $1.4 billion in the 3rd quarter of 2017.

The company lowered full-year earnings per share forecast down to $0.18 to $0.20 growth from previous estimates of $0.37 to $0.40.

Competition, the apparent continued decline of athletic leisure apparel, and brand sentiment outweigh the opportunities to innovate, grow internationally, and through athlete partnerships in my opinion.

After Under Armour recently reported dismal 3rd quarter 2017 results, I have lost hope for a turnaround. The company has lost their strategy of being an innovative upscale brand in an unsuccessful effort to maintain sales growth through deep discounting. Given the fact that the stock is still expensive on a Price-to-Earnings (PE) ratio and no optimism on the horizon due to consumer sentiment and increased competition, I expect the stock to continue to decline.

In this article, I'll identify topics from the earnings report to support my opinion. In my September 25th, 2017 article on Under Armour (UA, UAA), I wrote:

“Even though this appears to be cheap given the stock’s previous high, I’m still not seeing anything in the near term that will help reverse the company’s slide.”

I continued with my conclusion stating that,

“Until the company is able to reverse brand sentiment, I would not recommend buying Under Armour’s stock.”

Both of these statements were made after the company reported 2nd quarter earnings and the stock hovering around $16.50 per share and a price-to-earnings ratio near 26. Investors were hoping the company’s stock was finally finding a bottom after seeing negative news mount in the past few months including the brand was “losing relevancy compared to a year ago" in the very important U.S. teen demographic, job cut announcement in the company's connected fitness business unit, FBR Capital lowering their price target after recent channel checks, and a downward trend in athletic-leisure clothing.

However, despite the perceived bottoming, the stock moved lower as a result of the 3rd quarter earnings release mainly due to management lowering the full year earnings per share forecast down to $0.18 to $0.20 compared to the previous $0.37 to $0.40 figure.

The reduction in earnings per share came as a result of revenue falling 5% to $1.4 billion from the same quarter in 2016. This is a huge step backwards for the company that touted their streak of double-digit revenue growth quarters in the past. While the company was able to grow international revenue with a 35% growth (or 34% currency neutral), it represents such a small mix of the company’s overall sales at approximately 22%. The biggest problem is in North America where sales decreased 12%.

The company attributed the decrease to the implementation of the company’s enterprise resource planning system and related service levels along with lower demand; however, I believe the problems are much deeper rooted than that. I think it goes back to the recent self-destruction of the company’s brand. There is certainly less demand being fought over by more competitors, but good brands like Under Armour should have the ability to focus on core competencies and rise above the rest.

Unfortunately, Under Armour resorted to discounted prices and offering higher promotions than usual, which is why the company is cutting their full-year earnings per share forecast in half. The company resorted to these measures as management faced pressure from the street over revenue growth.

Instead of staying the course by creating innovative products, focusing on marketing, and expanding internationally, the company went away from this long-term strategy. The key to this strategy was offering products that consumers would be willing to pay much more than competitors because of the superior quality and brand image. During the earning’s call, Kevin Plank stated:

“In no way, shape or form do we anticipate changing the pricing model that makes Under Armour special and unique”.

Despite this statement, actions speak louder than words. The company has placed their products in Kohl’s, a department store known for their cash back rewards, in an attempt to attract women to their brand. However, the problem is that once a consumer becomes accustomed to seeing products at a lower price as a result of promotions, they aren't likely to pay more unless they have brand loyalty. When comparing brand loyalty to the other sports apparel companies, Under Armour is lagging behind which is evidenced by athletic footwear results.

It’s no secret that the Under Armour is facing a highly competitive retail landscape that is constantly changing as consumer sentiment shifts. This was evident in the NPD Group’s August athletic footwear data report. Adidas sport footwear sales grew more than 50% the month and share grew to 13% to become #2 in the market segment.

While Adidas still remains behind Nike for the #1 spot, they are stealing Under Armour’s sales with this hyper growth. In response, Under Armour basketball sales were down half. For the industry, sales were relatively flat year-over-year, which really puts a damper on Under Armour’s prospects in this segment. This comes the same month as NBA superstar, Kevin Durant, made the comment that Under Armour basketball shoes are harming colleges that enter into exclusive basketball shoe deals with them.

“Nobody wants to play in Under Armour's. I’m sorry. The top kids don’t because they all play Nike,” said Kevin Durant.

Despite this statement and the overwhelming negative brand sentiment, a positive for Under Armour is that they are still securing key partners including Cam Newton, Bryce Harper, Stephen Curry, Tom Brady, and Jordan Spieth. This is certainly key because as long as the company maintains these relationships with top athletes in popular sports, it will allow the company to continue to be relevant. These relationships along with a focus on innovation give the company a chance going forward. With the acquisitions of MapMyRun, MapMyRide, MyFitnessPal, and Endomondo, the company has created a community of nearly 200 million registered users.

This type of engagement will certainly help brand sentiment as users will want to continue purchasing Under Armour’s products in order to access the community. Despite this effort, I believe the company is clearly failing to tread water.

While the stock has seen further declines, the PE ratio is currently hovering around its lowest price-to-earnings ratio near 28 and a stock price of approximately $12.50, the stock still isn’t considered cheap by that metric. Even though this appears to be cheap given the stock’s previous highs, I’ve started to lose hope for a turnaround and I’m still not seeing anything in the near term that will help reverse the company’s slide.

With the athletic-leisure apparel trend slowing in the United States and a more competitive environment, I think the company will continue to see tough challenges. Despite these negatives, the company does have an opportunity with international expansion, innovative connected fitness community, and partnerships with superstar athletes.

Until the company is able to reverse brand sentiment and get back to charging a premium for their products, I would not recommend buying Under Armour’s stock.

[JohnCM]

I am taking a flier on calling bottom here, but using a "stop loss" order is imperative.

[JohnCM]

Under Armour: Nobody Left To Protect The House

Nov. 2, 2017 10:19 AM ET - Seeking Alpha

The sales slump is not the only problem to worry about.

Margins are in a downward spiral.

Estimates, while revised down significantly, are still too high.

Shares are set to drift into the single digits.

Under Armour’s (UA)(UAA) 3Q17 report, and more importantly, its 4Q17 outlook was a complete unmitigated disaster. Before the release, I was expecting 4Q EPS of about $0.10 ($0.21 consensus), FY18 EPS of $0.30 (consensus was $0.43) and viewed a fair value of $9-$13. The new UAA guidance was worse than I expected and implies 4Q adjusted EPS of just ($0.01)-$0.01, about a dime short of my estimate and ~$0.20 shy of the street. This warrants a valuation in the mid-high single digit range.

Everyone seems to agree that there is more pain to be had and no one is quick to catch this proverbial falling knife (last quarter there seemed to be more optimists bopping around). Although it seems fairly consensus, I still like the UAA short trade (especially paired with a Nike (NKE) long) and here’s why:

The sales growth has slowed and signs of a recovery aren’t in sight. This is the most obvious bear case point, and popular to discuss so I’ll just stop there. I will point out, however, that North American wholesale accounts for 63% of UAA sales vs. NKE’s 30% exposure. This is one of my key points on advocating the pair trade.

Gross margins are bad and getting worse. 4Q guidance implies gross margins of about 41.2%, a ~350bps decline from last year's 44.7% and 10% below the 4Q13 GM of 51.3%. With inventories growing 22% and a sluggish sales outlook, I expect margin deterioration to continue into the first half of 2018 as well (maybe not at a 300+bps clip, but deterioration nonetheless).

Given the wholesale distribution point expansion we saw this year, I would expect this lower margin profile to be a new normal.

Inventories are a disaster. Inventories up 22% vs. sales down 4.5% is not a ratio that leads to margin recovery. One big issue here is UAA’s current lead time of 18-22 months. Management spoke to shortening the time from design to shelf to 12 months, but Nike is still one step ahead, with initiatives to reduce that process to under 6 months as part of its triple double strategy (2x speed).

Recent upper management changes cause a culture of inconsistency. Earlier this month Kip Fulks, co-founder and long thought of as second-in-command officially took a sabbatical. Fulks previously transitioned out of the COO role to a “President of Product” role in March of 2015 at which time Brad Dickerson, the residing CFO took over the COO responsibilities. When Dickerson moved to another opportunity (CFO of Blue Apron), Chip Molloy became CFO, lasted one year and resigned this last January. The former VP of Finance now sits in the CFO seat and Patrick Frisk was hired as COO.

My question here isn’t on the competency of the new executives but in the longevity expectation of their roles there at Under Armour. While I’m sure CEO Kevin Plank sees himself as a Tom Brady of athletic apparel, the business units seem to have the quarterback consistency of the Cleveland Browns.

Estimates are still too high. The street cratered FY18 estimates to $0.24 from $0.43. I argue they didn’t go down far enough. There is no sign of gross margin recovery next year which is what $0.24 implies (assuming SG&A $ growth will outpace sales, which I view as a fair assumption). $0.24 seems rather optimistic given what we know now. I see a base case scenario where UAA earns $0.13-$0.17, and a bear case where they can earn only a dime next year. Only when I apply rather optimistic assumptions of sales and gross margin recovery happening pretty early in the year can I see exceeding the current estimates of $0.24. It’s possible, but definitely not probable.

Last but certainly not least; valuation. Using my estimates for valuation parameters, UAA is trading at 83x earnings and 20x EBITDA for a company with declining financials. This, under no circumstances, screams to me “value opportunity”. Essentially, this stock could get cut in half, again, and I would still need to see signs of operational improvement to become more constructive. Applying 15x my FY18 EBITDA estimate of $327 equates to a $8 share price, 10x would result in $4.50 per share.

In short, the stock still has a far way to go before it’s interesting on the long side. I think we would need to see clean inventories, sales acceleration in the double digits, and a clear pathway to significant margin recovery. We also need to see sell-side estimates more realistic, in order to avoid a series of guide downs. Multi-year visibility is hard here, but remaining negative on the story is not.

[JohnCM]

Under Armour: Down For The Count?

Nov. 1, 2017 8:05 PM ET - Seeking Alpha

Under Armour crashed following disappointing Q3 results.

The news leading up the report signaled the potential weakness.

The performance sports brand has plenty of expansion opportunities, but turnarounds are historically difficult to time.

Under Armour (UA, UAA) posted hideous Q3 results that have bears piling on an already negative situation. My previous research though highlighted this very exact scenario playing out.

The Under Armour Class A shares closed the day at $12.52 and are now trading around $12.00. The question is whether breaking even the bearish Wells Fargo $13 price target is the ultimate buying opportunity.

Leading up to the Q3 results, investors got hints that business wasn't going that well. The Wall Street Journal reported on October 23 that the performance sports apparel company was looking at exiting categories like tennis and fishing. Naturally, the primary reason to drop categories are disappointing results and the need to streamline operations.

This news was troubling and led to my tweeting the night prior to earnings that Q4 guidance could be ugly.

Ironically, Under Armour didn't officially announce any such decisions along with the Q3 results, but the company might want to wait until after the holidays and make such moves along with the Investor Day next year.

The Q3 numbers were indeed ugly with revenue down 5% to $1.4 billion as North American wholesale revenue declined by 13% to $880 million. International revenues were up a strong 35% and footwear actually held steady with 2% growth to $285 million.

So despite seeing value in the stock with a strong brand trading at a low P/S multiple in comparison to a Nike (NKE), my desire to actually load up on the stock was reduced. Stocks in a deep downtrend are very difficult to turn around with the bottom unknown, and Under Armour proved this reality with a horrendous Q3 and weak holiday guidance as inventory soars.

Incredibly, the stock only has a market value of $5.5 billion now with sales approaching $5 billion this year. The problem is that Under Armour hasn't proven the ability to generate sustainable profits. The company built the current organization on the basis of a much larger business in the future, but CEO Kevin Plank still needs to prove the ability to generate massive cash flows.

The updated guidance leaves Under Armour precariously close to breakeven for the year. Sure the company earned an adjusted operating profit of $100 million in Q3, but the full year forecast is now only a meager $140 to $150 million. Operating margins in the single digits aren't going to cut it for the market cap to recover.

While Under Armour is struggling in North America, plenty of long-term upside exists in international locations and footwear. Part of the income issues and the reasons the WSJ discussed the exiting of business lines is that the company is spread very thin including still developing these areas.

Footwear revenues are meager at only $285 million last quarter. At an annual run rate of somewhere around $1 billion, the company far trails the levels at Nike that sold $5.5 billion worth in the last quarter alone. Yes, Nike has a footwear business that topped the total sales of Under Armour in one quarter alone.

As well, international expansion is still in the relatively early stages for Under Armour. The highest revenue total for a region outside of the U.S. is now Asia-Pacific at only $130 million in the last quarter.

Source: Under Armour Q3'17 earnings release

Nike did over $300 million in apparel alone in all three international regions of EMEA, Greater China, and APAC/Latin America. The divisions don't exactly match those of Under Armour, but the scale of operations are enormous at Nike in comparison to the lagging performance sports company.

Under Armour has an incredible opportunity to expand the market and grow market share outside North America. The key investor takeaway is that Under Armour has to return to a performance and innovation focus to maintain the brand. If done correctly, the company has decades of growth ahead in expanding in footwear and internationally.

As my investment thesis has said for a while now, the stock has value trading down at roughly a P/S multiple 1. The stock though can always go lower so investors need to be careful while diligently waiting for the turn of one of the better retail brands.

[JohnCM]

https://seekingalpha.com/symbol/UAA?s=uaa

[JohnCM]

[JohnCM]

SAFE

[AnG5640]

I remember when Adidas was cool when I was in grade school.....a looooong time ago. Then it faded away for years. I guess fashion really does repeat itself....

All my step-daughter wears is UAA! That should have been enough spent to prop the stock, lol.

[bigideaportugal]

Forget short term....i'm looking for this to have a similar run like Soda Stream did after it tanked.. It will happen... 80 to 12 back to $70. Just take time!

[///M3]

Can’t argue that short term may work out well

[JohnCM]

I would nibble here. Buy 1/2 or 1/3 position.

[bigideaportugal]

I've been adding 100 shares on every .2.5% drop... Added 600 additional shares since earnings. I really goofed on the first buy but whatever..

Plank is gonna get control of this ship again! He's going to have to ride out one more poor earnings report but the guidance should improve with MLB deal coming in the Spring.

This company was run by a bunch of his buddies but VF Corp executive put an end to all the BS. Everyone but Plank reports to him. That's why Kip Fulks took a sabbatical,,, probably used to having "shoot the chit" meeting with Plank, now he finally has to report to someone who's not interested in small chat.

They still have a nice list of superstars that will take this company higher. This was the first time we landed 2 out of the 10 top NBA players,,,so those that say UA isn't getting more people are off.

Getting ASAP Rocky is big,, he's got a huge following and should compete with Kayne's following over the next few years.

Nice things happening in the pipeline but Planks's gotta take his AZZZ out of his water taxis,,, distillery business and FOCUS, FOCUS, FOCUS!

Just read today they're getting out of the Fitness tracking business. What a CHIT show that was.

[Fastrader247]

This is going to the single digits by year end. Let it fall and buy lower. It is still a great band just mismanaged on the top level.

[JohnCM]

Still soft ...

[PNYSTKB]

Adidas took over with the Kanye West deal. All UA has to do is get back to being cool with the kids again. Shouldn’t be hard. They have Curry, Harper, and the Rock. Everything the Rock has put out sells out. They will make a come back. It’s time to buy.

[///M3]

Don’t need a survey go by any school it’s all Adias

[JohnCM]

Right there. 50 cents off today. Go time.

[AnG5640]

You’d think there’d be a relief bounce somewhere soon....

[AnG5640]

The Sears by me just closed. It’s been there as far back as I can remember.... never thought it would be gone.

I’m really surprised that UAA isn’t doing better... But apparently a recent survey said that teens are “over” the brand.... (translation...teens don’t think it’s cool anymore, lol)

[JohnCM]

The drop is slowing. I think I mentioned yesterday another 50 cent drop then buy.

[///M3]

How is sears still in business ? The writing was on the wall for this drop. I won’t jump back in till clear reversal

[JohnCM]

I don't short. Sears would have been a good one.

[JohnCM]

It will bottom tomorrow. Maybe around noon. 50 cents lower?

[JohnCM]

Did not bottom yet. Tomorrow and I may try again.

[AnG5640]

Dropping fast now...jeeze... woulda loved to have puts...

[AnG5640]

Good call.... this things in the toilet...

[JohnCM]

OUT

[AnG5640]

I can’t bring myself to get in yet..... I’ve been watching this thing drop forever!

[JohnCM]

IN

[AnG5640]

Jeeze, can’t believe this is going lower. Time for a new CEO.

[Xxmatty87xx]

Well I can say that I’m so very disappointed in Plank.... he is ruining peoples lives.

[AnG5640]

UAA just started selling their gear at Kohl’s (last Qtr?). Sounds like sales of UAA stuff saved Kohl’s (KSS) from having a really bad Qtr. Kohl’s is a pretty big chain in my area. Maybe we do get a surprise. We’ll see tomorrow!!

[bigideaportugal]

i think Plank will surprise all.....i've been adding on the dips.

they will get rid of tennis and outdoor, saving $$$$

they will def be down in the US market but if they can show growth in China etc..... we should move back to the 20's..

if for whatever reason we end up going lower on earnings I will be loading another 1000 shares,, hopefully $10 bucks if!!

[///M3]

Most likely a sign of missed earnings why the run to the door