Under Armour took a sudden fall on a weaker outlook
As we saw in Part 1 of this series, Under Armour’s (UA) share price fell a whopping 13.0% after it released its 3Q16 results on October 25, 2016. The massive fall was a result of a warning that came from the company’s management regarding a slowdown in sales growth over the next two years.
Chip Molloy, Under Armour’s chief financial officer, said, “While we expect to continue to significantly outpace the apparel industry, the growth rate going forward will be less than expected from our Investor Day in 2015.”
A 20.0% sales growth is a deceleration compared to previous years
While Under Armour expects to hit its 2018 revenue target of $7.5 billion, it’s looking for sales growth in the low 20.0% range over the next two years. Projected sales are a deceleration from the average 30.0% yearly growth achieved over the last five years.
Molloy, commenting on the targets and expected growth, said, “At our 2015 Investor Day, we announced our goals of achieving $7.5 billion of revenues and $800 million of operating income by 2018. We are on track to achieve our 2018 revenue goal of $7.5 billion and expect to grow full-year revenues consistently in the low 20%s in both 2017 and 2018. At the same time, we expect annual operating income growth in the mid-teens each of the next two years as we focus on investing to get big fast.”
Under Armour’s sales growth would still outpace its peers
Despite the slowdown, Under Armour should continue to outshine its close competitors in the near term. According to Wall Street estimates, Under Armour’s sales are expected to rise 23.0% and 24.0% in fiscal 2017 and fiscal 2018, respectively.
Sales for sportswear giant Nike (NKE) are predicted to rise 8.0% and 9.0% over the next two years, respectively. Lululemon Athletica’s (LULU) revenue is expected to rise 14.0% and 12.0% over the next two fiscal years, respectively. Columbia Sportswear’s (COLM) top line is expected to rise 5.0% and 7.0% over the next two fiscal years, respectively.
As a company with high growth prospects, Under Armour is part of ETFs that invest in companies with a growth slant. The company is therefore a component of the iShares Russell Mid-Cap Growth (IWP), which invests 0.26% of its portfolio in UA.