Wall Street gives Under Armour the cold shoulder


Photo courtesy of Under Armour.

By Nick Kariuki

Although Under Armour Inc.’s reported a solid third-quarter earnings increase, investors chose to look past those results and fret about whether the sports- apparel maker will be able to sustain its headlong sales growth into next year.

The Baltimore company’s net income rose 9.5 percent to $89.1 million, or 41 cents  per diluted share,  from $72.8 million, or 34 cents per share in the year-ago quarter. The per-share results topped analyst predictions by a penny.

Revenues climbed a more substantial  30 percent to $938. 9 million from $723.2 million a year ago. That was the fourth consecutive quarter with growth of 30 percent or higher, Under Armour noted.

Under Armour, which has enjoyed phenomenal growth in recent years as consumers responded well to its original line of “performance sports wear,” and to later products such as athletic shoes.  Last month Under Armour passed German competitor Adidas as the No. 2 sports brand in the United States.

Its share price has tracked the company’s expansion: over the past four years, Under Armour shares have jumped more than five-fold.

More of that same growth trajectory lies ahead, according to the company’s founder and top officer.  “Our strong third quarter results demonstrate the power of the UA brand,” Chairman and Chief Executive Officer Kevin A. Plank  told analysts during Thursday’s conference call.

Plank also announced that the company is the set to reach $3.03 billion in in sales for full-year 2014, another milestone for the fast growing company.

Despite the positive results that Under Armour reported Thursday morning, however, the earnings  found a chilly reception on Wall Street,  as investors seemed more concerned that apparel sales growth  slowed in the quarter to 26 percent from 35 percent in the previous quarter.

In New York Stock Exchange trading, Under Armour shares initially fell as much as 6.4 percent., but the stock  began to recover and ended the day down $1.71, or 2.6 percent, at  at $64.34. Plank downplayed concerns about the sales growth slowdown.  “Like anything there’s ebbs and flows in any business,” he said.  “But I think we’re incredibly proud of the number and what our team has put forth.”

Brad Dickerson, Under Armour’s Chief Financial Officer also announced that the company is expecting 2015 revenue and operating income will each grow by  about 22 percent. That’s a bit lower than the company’s previous expectation of 24 percent growth.

Some analysts shrugged off the slightly downbeat new guidance, noting that the company frequently turns out to top the forecasts it issues. “I can’t remember the last time Under Armour’s earnings haven’t beat” earlier guidance, said Sharon Zackfia, analyst for William Blair.

For Zackfia, the key takeaway from Thursday’s report was the company’s solid performance in international and footwear. Net revenues in footwear rose 50.1 percent from last year’s third quarter total. International net revenues saw an increase 94 percent.