Under Armour will be going into its first-quarter earnings call on Thursday with mixed reviews from analysts.
Following golfer and Under Armour athlete Jordan Spieth’s unsuccessful showing at the Masters last week, the Baltimore sports apparel brand’s stock declined by 5 percent, prompting Morgan Stanley to put out a note affirming the Baltimore-based company’s underweight rating.
In the note, Morgan Stanley Analyst Jay Sole said that while Under Armour will likely report strong first-quarter numbers, its growth in footwear sales is “unsustainable” because the company has had to sharply cut prices.
“The average selling price for Under Armour running footwear has dropped by 23 percent since 2013, while it has only fallen about 4 percent for the industry,” the note said.
Auburn Bell, adjunct marketing professor at the Loyola University’s Sellinger School of Business, breaks down Under Armour’s growth into three areas: footwear, international and technology.
In the fourth quarter, some of the brand’s biggest growth was in footwear with net revenues increasing by 95 percent from the previous year, attributed to the success of the Stephen Curry signature basketball line and more running shoe offerings.
“I think that will continue to drive some positive results for them,” said Bell.
Morgan Stanley predicted a 170 percent year-over-year spike in Under Armour’s North American basketball footwear business, along with a 70 percent increase in international business as the primary growth drivers for the first quarter.
SportsScan, which tracks retail sales in stores and online, anticipates a 2 percent decrease in wholesale apparel and a 7 percent decrease in women’s apparel sales.
Women make up 30 percent of Under Armour’s business, including apparel, footwear and accessories. The division is on track to bring in over $1 billion this year, Under Armour said.
But the brand needs to offer more for women, said Bell.
“I think they need to do more because it (women’s business) definitely represents a bigger opportunity for them in terms of growing their business, given the focus women put on health and fitness,” he said.
Morgan Stanley analysts expect more from Under Armour’s women’s business this fall.
“We expect a major new product assortment launch this fall, which will be much more fashion-forward and athleisure-ish than anything UA has ever done.”
The first quarter typically is not a good indicator of the rest of the year’s performance, said Bell.
“I think if any quarter that can define an emerging trend in the apparel business, it might be in the fourth quarter,” he said, given the holiday season’s influence on sales.
This year’s first quarter was particularly difficult, given the volatile stock market in January.
“I think it makes the quarter for any firm a hard one to judge,” said Bell.
Under Armour has projected 2016 net revenues of approximately $4.95 billion, or 25 percent growth over 2015.