Under Armour Needs A Knight In Shining Armor

Under Armour Needs A Knight In Shining Armor

about 4 years ago2 mins

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Under Armour doesn’t look nearly as charming in the bright light of day: the sportswear brand admitted on Tuesday it’ll have limp sales this year, and its shares plunged almost 20% 😰

What does this mean?

Under Armour’s fourth-quarter sales came in well below analysts’ expectations, while its sales across the whole of 2019 were up just 1% from the year before. That alone was a kick in investors’ teeth, but they seemed especially concerned by the company’s outlook for 2020: Under Armour revealed the coronavirus outbreak could cost it as much as $60 million in sales this quarter.

That’s not the only hurdle ahead, either 🏃‍♀️ Competition from the likes of Nike and Adidas means Under Armour is also forecasting a “high-single-digit” sales drop in the US this year, bringing global sales down by a mere “low-single-digit” drop. That’s not exactly the 4.2% growth investors were hoping for…

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Why should I care?

Just when you thought Under Armour had completed brand-problem bingo, it goes and gets a full house. The company is more reliant on department stores like Kohl's than other sportswear firms, but those retailers are going through their own problems: they’ve had to slash prices to better compete with Amazon’s rock-bottom prices. And when shoppers get used to finding Under Armour on the discount racks, they’re far less likely to pay the full $350 its pants should cost 👖

Under Armour’s shares didn’t plunge just because its results were bad: they plunged because investors didn’t expect them to be. Investors always try to predict what’s going to happen in the markets ahead of time, but sometimes they’re just plain wrong. On the flip side, that means there are also pleasant surprises: a judge approved Sprint’s merger with T-Mobile US on Tuesday, and investors – who’ve spent the last few months convinced it would be blocked – sent the telecoms company's shares up over 70%.

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