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Under Armour Makes Key Changes in Its Management

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Price movement

Under Armour (UA) has a market cap of $16.5 billion. It rose by 4.7% to close at $40.94 per share on August 11, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 5.1%, -1.4%, and 1.6%, respectively, on the same day. UA is trading 0.87% above its 20-day moving average, 4.2% above its 50-day moving average, and 0.19% above its 200-day moving average.

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Related ETF and peers

The Schwab US Broad Market ETF (SCHB) invests 0.05% of its holdings in Under Armour. The ETF tracks a cap-weighted index that measures the largest 2,500 stocks in the United States. The YTD price movement of SCHB was 7.8% on August 11.

The market caps of Under Armour’s competitors are as follows:

  • Nike (NKE) — $95.4 billion
  • Skechers USA (SKX) — $3.8 billion
  • Columbia Sportswear (COLM) — $3.9 billion

Under Armour’s key appointments

Kip Fulks has been appointed as chief product officer, and according to a company press release, “will drive the strategy and integration of category management, marketing, product, merchandising, innovation and sourcing, to deliver best-in-class products and brand experiences to athletes around the world.”

Colin Browne has been appointed as president of global sourcing and will report to Kip Fulks, effective September 6, 2016. Andy Donkin has been appointed as chief marketing officer and will report to Kip Fulks, effective August 22, 2016.

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Performance of Under Armour in 2Q16

Under Armour reported 2Q16 net revenues of $1.0 billion, a rise of 27.7% over the net revenues of $783.6 million in 2Q15. Revenue from apparel, footwear, accessories, licensing, and connected fitness products rose by 18.9%, 58.0%, 21.3%, 16.0%, and 73.3%, respectively, between 2Q15 and 2Q16. The company’s gross profit margin and income from operations fell by 1.4% and 39.3%, respectively.

Its net income and EPS (earnings per share) of Class A and B common stock fell to $6.3 million and -$0.12, respectively, in 2Q16, compared with $14.8 million and $0.03, respectively, in 2Q15. It reported EPS of Class C common stock of $0.15 in 2Q16, compared with $0.03 in 2Q15.

Under Armour’s cash and cash equivalents fell by 6.7% and its inventories rose by 38.8% between 4Q15 and 2Q16. Its current ratio fell to 2.6x, and its debt-to-equity ratio rose to 0.93x in 2Q16, compared with 3.1x and 0.72x, respectively, in 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • net revenues: ~$4.9 billion
  • operating income: ~$440 million–$445 million
  • interest expense: ~$32 million
  • effective tax rate: ~36.5%
  • fully diluted weighted average shares outstanding: ~448 million

In the next part of this series, we’ll discuss Nike.

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