Here's Why Under Armour's Stock Has Lost More Than 50% YTD
Under Armour, Inc. UAA has been bearing the brunt of the ongoing pandemic and stiff competition. Shares of this developer, marketer and distributor of apparel, footwear, and accessories have plunged 56.2% so far in the year, compared with the industry’s decline of 24.5%. This Zacks Rank #5 (Strong Sell) stock came under pressure following the company’s dismal first-quarter 2020 performance, owing to the coronavirus pandemic that led to the closure of vast majority of stores.
This Baltimore-based company reported wider-than-expected loss. Also, its top line fell sharply from the year-ago period and missed the Zacks Consensus Estimate for the second quarter in row. Sales declined across all categories, except Connected Fitness. Although the company is taking every step to address challenges, it still expects revenues and margins to remain under pressure.
Under Armour at its last earnings call had notified that second-quarter 2020 revenues are expected to be down as much as 50-60%. Moreover, even as the operations resume, the company has to encounter with number challenges that include slow and progressive return to normalization, a highly promotional environment, and significant uncertainty in brick-and-mortar traffic and conversion as consumers return to stores.
We note that net revenues during the first quarter had declined 22.8%. Wholesale revenues decreased 28%, while direct-to-consumer revenues were down 14%, owing to North American business. Sales decline in North America has been a major concern for investors in the past few quarters. Net revenues from North America plunged 27.8% during the first quarter. This softness in revenues was primarily due to a decrease of unit sales within wholesale and direct-to-consumer channels, which were impacted by closures of stores by wholesale partners and closures of brand and factory house stores in mid-March 2020.
Under Armour had earlier highlighted that it intends to lower full-year operating expenses by roughly $325 million through various strategic measures, which comprises cutting of incentive compensation, temporarily laying- off associates working in owned retail stores and U.S.-based distribution centers, curbing of non-essential operating expenses, and postponing planned capital expenditures. Management expects to incur capital expenditures of approximately $100 million in 2020, down from its prior projection of approximately $160 million. Additionally, the company is actively managing inventory receipts and negotiating payment terms with vendors. Per media reports, the company is also looking to offload MyFitnessPal — an app that tracks diet and exercise.
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