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Did China Put the Last Nail in Under Armour’s Coffin?

What’s interesting about Under Armour is that its share price has dropped by 50% over the past 6 months

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1Q22 Earnings results were disappointing

Investors lower profit outlook and punish share price

  • Within 1 day, UA’s share price plummeted by 25%
    • At about US$10 it is now 53% below its 12-month high
  • What sparked the fall?
    • Under Armour reported an unexpected quarterly loss of US$60m

Under Armour has been involved in several scandals

Strategy shift under new CEO hampered by external shocks

Long way to close gap with competitors

  • Under Armour still hasn’t gotten its SG&A under control, and it continues to be a drag on operating margin
  • SG&A has been consistently over 40% of revenue
    • UA’s restructuring plan has not yet borne fruit

How did consensus assess Under Armour before earnings results?

  • Analysts were equally divided between BUY and HOLD
  • In the past few months, analysts constantly reduced their price targets
    • Further downward adjustments are likely after the latest earnings results announcement

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