Under Armour shares plunge 17 per cent after revising 2020 projections
Retailer envisions significant coronavirus hit
Sports retailer Under Armour has seen its share price drop by 17 per cent after it warned investors that the coronavirus epidemic could severely dent 2020 sales.
The American firm reported a net loss of 3 cents per share or $15.3m (£11.8m, €14m) in the fourth quarter of 2019, compared to a net income of 1 cent per share or $4.2m a year previous. Nonetheless its Q4 performance was largely in keeping with analyst estimates.
A poll by Refinitv predicted the company to report earnings per share of 10 cents and $1.47bn. While Under Armour missed this revenue prediction by $30m this was still an improvement on the same period in 2018 and it achieved the earnings per share target.
Under Armour’s new chief executive officer Patrik Frisk dashed analyst predictions of 4.2 per cent overall sales growth in 2020 by outlining severe “ongoing demand challenges.” Instead Frisk predicted that sales would be down by a low-single digit percentage with North American sales falling by between 7-9 per cent.
Such a marked reversal shocked pre-market traders and within less than an hour of trading on the New York Stock Exchange Under Armour’s share price has fallen 16.89 per cent to stand at $17.00.
Frisk also outlined his belief that the coronavirus epidemic poses a significant threat to the company’s performance, stating: “We think it’s reasonable to expect industry-wide delays in terms of delivery around the world – including potentially missed shipment[s] and service windows, and the need for increased air freight and additional measures at ports that could create unforeseen congestion.” The CEO argued that 2020 sales could be lower by between $50-60m as a result of the crisis.
However, the coronavirus alone cannot be said to be the main factor for Under Armour’s recent woes. The company that experienced quarterly revenue growth of 20 per cent for more than 20 years has stumbled in recent years, reporting its first ever quarterly loss in 2017. With brands such as Lululemon, Adidas and Nike intensifying the competition and gaining popularity with a new generation of young people, Under Armour has struggled.
In the United States and Canada particularly, the company is dependent on wholesale partners. While its rivals have focussed on selling direct to consumers, Under Armour has risked going down with the declining retail sector.
The company is currently undertaking a major restructuring plan under its first CEO since founder Kevin Plank stepped back into the executive chairman role.
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