As Under Armour reports their third quarter earnings that hit their earnings expectations, the American sports brand has also reported its forecast for their sales growth until 2018.
Despite the positive third quarter earnings report which showed that the company earned a net income of $128.2 million showing earnings of $0.29 per share from last year’s same quarter earnings of $0.23 per share and a net income of $100 million, the company also reported their slowest quarterly sales growth yet led by the slowdown in their overall sales in their biggest market which is North America. The bankruptcy of the Sports Authority which was then a huge retailer of Under Armour’s products
According to analysts, the company’s slow growth has just started as the company also expects the slowdown to last until 2018. The company posted a 15.6% growth in their third-quarter sales but is considerably lower by 20% compared to their recent reports in the past quarters and years.
Over the past three years, the American apparel and footwear brand has reported over 27% of sales growth from the year 2013 to 2015 even recording an annual sales growth of 32% back in 2014 which shows how low the forecast for the coming two years are.
UA Sales in Other Countries
Just this September, Under Armour, announced their plans to expand their market in China after they reported a 20% in the share price of the company and the growing competition most especially from Nike. The net income of the company then was reported to have dropped by 58% to $6 million in the quarter prior to the third quarter. Prior to the plan to expand in the country, the company then recorded a $1 million revenue in the China alone.
It was also the decline in their net income that led to the company downgrading their forecast in their net revenue to $4.295 billion from $5 billion and profits of $440 million from the initial forecast of $445 million.
UA Shares Decline on Low Sales Growth
Regardless of Under Armour’s earnings beat, the shares of the company dropped to almost 13% despite the shares climbing up by 6% during pre-market trading in light of their third quarter earnings report due to the company downgrading their forecast for their growth prospects until 2018.
After reporting growth which ranged from 27% to 32%, the company is now expecting a growth less than 20% following a decline in the sales of their North America stores which is their biggest market to date.
Under Armour shares traded at around $38-$39 before dropping to trade at 32.89 from an opening price of 32.67 showing a decline of 13.22%. The RSI indicator also showed that Under Armour stocks were oversold with the line going beneath the 30 level.
Under Armour’s current net income is $128.2 million, 28% higher than their 2015 net income which is $100.5 million going past by the $110.0 million analyst forecast. The revenue of the company also grew by 22% reporting $1.47 billion compared to last year’s $1.20 billion and beating the forecast revenue of $1.45 billion.
Although Under Armour shares are set to rally in the coming trading sessions, the price is not set to gain back a huge chunk of their losses as the stock is already oversold and also despite the third quarter report going beyond analyst forecasts, the decline only showed that investors were concerned about the news regarding the company’s sales growth considering that the sales growth has not declined for the past three years, this coming along with the fact that Under Armour has still a long way to go in leveling up to its main competitors which are Adidas and Nike.
The direction of the company’s sales standing is still yet to change following announcement in the past month that supports the fact the Under Armour is building on its brand, sponsoring more athletes and events one of which was their plans to be the provider of the Major Basketball League’s uniforms and expanding their market in other countries.