Why Under Armor Stock is plummeting again today
Sportswear manufacturer shares Under protection (NYSE: UA)(NYSE: UAA) were down 6% by midday Wednesday, continuing their slide after a disappointing results report On Monday.
Under Armor was in trouble before the coronavirus pandemic hit, but the forced closure of retail stores hit it hard. Unlike many other companies, it has not been able to effectively switch to a direct-to-consumer (DTC) model, resulting in a bigger drop in sales than it would otherwise.
There doesn’t seem to be much hope of a quick turnaround for Under Armor, even if retailers are allowed to reopen, as is happening in a number of states.
CEO Patrik Frisk told analysts on the earnings conference call that since mid-March, when COVID-19 was declared a pandemic, “around 80% of our global business has stalled.”
While it’s no surprise for its physical presence in retail, what is surprising is Under Armor’s inability to capitalize on its e-commerce channel, which it has once described as l ‘one of its “greatest long-term growth opportunities”. DTC’s revenue fell 14% in the first quarter.
It also risks damaging its reputation with athletes. CFO Dave Bergman said Under Armor was renegotiating their contracts with them and in a number of cases “we were able to get extended payment terms.”
The company looks to the second half of 2020, and possibly 2021, before it sees business normalize. Investors aren’t waiting that long and its stock is down nearly 12% this week.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.