Under Armour Q2 Earnings: Big Things Are In Store The Company Despite Flat Earnings

July 27th, 2016 by Trefis Team
-14.80%
Downside
8.91
Market
7.59
Trefis
UA: Under Armour logo
UA
Under Armour

Under Armour (NYSE:UA) announced earnings earlier this week. The company met expectations and delivered some strong figures across all segments. Despite this, the stock fell about 3% in pre-market trading as numbers fell on a year on year basis. However, one cannot undermine the potential that UA possesses and has displayed over the years. To put this into perspective, Under Armour has posted an average 34.4% earnings surprise over the in the last four quarters. Furthermore, the company’s overall sales jumped 28% year on year this quarter. Despite falling marginally short of the consensus estimate, such performance is rare feat given the current market conditions.

Key Highlights:

  • The company has relied heavily on key strategic retail partnerships over the years to grow the brand and rake in additional sales. Retail revenues across all segments have grown at a notable CAGR of 34.66% from 2010 to 2015. This quarter, the management decided to take things a step further by announcing a partnership with Kohl’s, one of America’s top activewear retailers. This partnership will enable the company to tap into a large and loyal customer base, a majority of which are women. As the women’s category continues to remain a sluggish growth opportunity for the company, such a partnership could just be the right move to turn things around.
  • Under Armour has announced plans for massive geographical expansion, most notably in Greater China. China is poised to be a key market for the company as the country’s consumers are getting more serious about training and fitness. To tap into this growing opportunity, the management has devised plans to open more premium brand houses and follow a full-price business model focussed on basketball, running and training. Furthermore, the company hopes to increase its e-commerce reach globally. E-commerce business in the quarter increased by 157% this year so far. Additionally, the Curry brand continues to sell itself and the Curry 2 has become the company’s top-selling product in the region.
  • Operating income suffered a major blow this quarter primarily due to a $23 million impairment charge related to the Sports Authority liquidation. However, this is only a one time charge and will not affect profits going forward.
  • The company drove guidance down a bit based on current conditions. In terms of revenues, the company now expects $4.925 billion, representing growth of 24%, for 2016. Additionally, Under Armour expects operating income to lie within the $440 million to $445 million range, representing growth of 8% to 9%.

Screen Shot 2016-07-27 at 10.10.25 pm

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment / ask questions on the comments section

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our full analysis for Under Armour

Relevant Articles
  1. What’s Next For Under Armour Stock?
  2. Down 20% This Year, Will Under Armour’s Stock Recover Following Q4 Results?
  3. Down 25% This Year Will Under Armour Stock Rebound After Its Q2?
  4. Under Armour Stock Down 24% This Year, What’s Next?
  5. Under Armour Stock Up 28% Over Last Month, What’s Next?
  6. What To Watch For In Under Armour’s Stock Post Q1?

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research