Under Armour CFO to resign; Q4 results miss Wall Street forecasts

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Under Armour CEO Kevin Plank conceded Tuesday the sports apparel giant was “out of balance” in the fourth quarter as the company released its earnings and announced a major personnel move.

CFO Chip Molloy is leaving the company at the end of the week for personal reasons, the company said. The PetSmart alum joined Under Armour a year ago, replacing Brad Dickerson, who was with the company for 16 years.

Molloy will be replaced by David Bergman, who is currently senior vice president for corporate finance, and will serve as acting CFO. Bergman joined Under Armour in 2005 and is currently responsible for all major finance functions including financial planning and analysis, treasury and tax. Molloy will stay on in an advisory capacity to assist with the transition, Under Armour said in its fourth quarter earnings release on Tuesday.

Baltimore-based Under Armour reported fourth-quarter net income of $104.9 million and profit of 23 cents per share.

The results missed Wall Street expectations. The average estimate of 21 analysts surveyed by Zacks Investment Research was for earnings of 25 cents per share. Under Armour posted revenue of $1.31 billion in the period, which also fell short of Street forecasts; sixteen analysts surveyed by Zacks expected $1.41 billion.

Under Armour attributed the flat earnings to slowed sales in North America at the end of last year. The region is the largest revenue-driver for the company, making up 85 percent of the business.

“Numerous challenges and disruptions in North American retail tempered our fourth quarter results,” Plank said.

To get back on track, Under Armour needs to focus on being a premium brand that pairs performance with fashion, Plank said.

“We have a responsibility to perform every quarter,” he said. “We want to make sure we continue to invest in and protect the brand.”

As more brands offer fashionable athletic wear, Under Armour needs to make its products stand out.

“To be a lifestyle brand you have to be grounded in something. Under Armour is grounded in performance,” Plank said.

Company executives kept on Tuesday’s call referred to Under Armour as a $5 billion company building to become a $10 billion company. Under Armour is projected to cross the $5-billion mark this year, as it sits currently at $4.8 billion. Its long term goal, announced during the company’s 2015 Investor Day, is to be a $7.5 billion company by 2018.

Footwear and women’s apparel hit $1B

For a company that has consistently reported more the 20 percent growth, Tuesday’s  earnings report was a reminder that such expansion is not always guaranteed.

“They’re preparing for the fact that going forward, results are not going to be as stellar as they were in the past,” said Karyl Leggio, finance professor at the Loyola University Sellinger School of Business.

Under Armour stock plunged 25 percent after Thursday’s earnings release. Leggio said some of the drop could be attributed to the uncertainty around the company CFO’s departure and impending search for a replacement, Leggio said.

While Under Armour is positioning itself as a premium brand, the company is going to face the challenge of maintaining premium pricing in a market where consumers expect discounts, Leggio said.

“It’s admirable, but it’s hard,” Leggio said. “The real challenge will be what happens in first and second quarter of this year.”

But it wasn’t all bad news for Under Armour. The company finished 2016 with its footwear and women’s apparel business each hitting $1 billion in revenue. Total revenue was up 22 percent. Broken down by region, North American revenues grew 16 percent, while international revenues grew 63 percent, the company reported.

Under Armour shares have declined slightly since the beginning of the year, and its stock has fallen 33 percent in the last 12 months. The stock’s closing price Tuesday afternoon was $21.49.

The Associated Press contributed to this story.