Please ensure Javascript is enabled for purposes of website accessibility

Analysts lower expectations ahead of Under Armour 4Q call



It’s been a busy season for Under Armour, from releasing a range of products and partnerships to naming a new CFO. But it hasn’t all been good news for the Baltimore sportswear maker, stemming from a slow holiday season that hurt the retail industry as a whole and a recent downgrade from analysts at Morgan Stanley.

Earlier this month, Morgan Stanley analyst Jay Sole downgraded Under Armour from “equal weight” to “underweight” citing its loss of market share in apparel and falling average selling prices. Under Armour’s price target was cut to $62 from $103.

“Both trends are more pronounced in women’s apparel, despite major marketing investment in this division last year,” said Sole.

The stock market reacted to the downgrade as Under Armour shares fell 6.72 percent the day the report was released.

Other analysts have also followed suit in doubting Under Armour’s ability to meet expectations.

“Our proven model does not conclusively show that Under Armour is likely to beat earnings estimates this quarter,” a report by Zack’s Investment Research said Monday.

Like Morgan Stanley, Zack’s Investment Research rank’s Under Armour stock as a sell ahead of the brand’s fourth quarter earnings call on Jan. 28.

Despite some negative projections, Karyl Leggio, finance professor at the Loyola University Sellinger School of Business thinks Thursday’s earnings call will be positive.

“They didn’t have a great quarter because retail didn’t have a great quarter,” said Leggio. “It’s just such a solid company.”

To make up for a slower retail season, Under Armour did some price cutting, and the market didn’t like that, said Leggio, adding that customers often have high expectations from a company that’s growing as quickly as Under Armour.

Last year, Under Armour leaders announced  their goal to become a $7.5 billion company by 2018. During its third quarter earnings call, Under Armour announced its first $1 billion quarter.

Company officials are also expected to talk about Under Armour’s Connected Fitness applications, including its new UA Record platform and its partnership with IBM’s Watson computer, which will track more data about users’ workouts.

Under Armour, like many apparel companies, wants to focus on women’s athletic wear. While Morgan Stanley pointed to loss of market share in the women’s apparel market as one of the reasons for the brand’s downgrade, the company is expected to discuss its plans for women’s wear on Thursday.

Under Armour CEO Kevin Plank’s real estate development firm Sagamore Development Co. is also scheduled to disclose its plans for a new global headquarters at a Thursday meeting of Baltimore’s design review panel — but don’t expect any mention of that during the call.

“That’s a local story that has very little significance for global shareholders,” said Leggio.

Thursday’s call will be the last one for Chief Financial Officer Brad Dickerson, who is joining New York grocery startup Blue Apron. His replacement, Chip Molloy, former CFO of PetSmart, started on Jan. 19 and is expected to be on Thursday’s call. Dickerson announced his departure from Under Armour in October after nearly 16 years with the company.