Under Armour (UAA) stock had risen 2.0% as of 1:26 PM EDT on April 10 after Citigroup upgraded its rating to a “buy” from a “neutral,” citing the company’s renewed focus on improving its profitability. Citigroup foresees a 600-basis-point expansion opportunity in Under Armour’s EBIT margin over the next several years. Citigroup raised its price target for Under Armour stock to $29 from $23.
Under Armour stock fell 4.7% on April 8 after a recent survey by B. Riley indicated that the company was losing ground to its competitors in the footwear space.
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Top line expectations
Under Armour announced better-than-expected results for the fourth quarter in February. Under Armour’s revenue (including apparel, footwear, and accessories sales, licensing revenue, and connected fitness revenue) rose 1.5% to $1.39 billion. However, the company’s footwear and accessories businesses disappointed with 4.5% and 2.2% falls in sales, respectively, in the quarter. Under Armour’s apparel sales rose 2.0% in the fourth quarter.
Another concerning aspect was the continued weakness in Under Armour’s North American revenue, which fell 5.8% and 1.8% in the fourth quarter and 2018, respectively. Heightened competition and the bankruptcies of several retailers have been dragging down Under Armour’s sales in North America.
Under Armour’s revenue rose 4.1% to $5.19 billion in 2018 driven by its international business. The company’s international revenue rose 23% driven by continued strength in Europe, the Middle East, and Africa and the Asia-Pacific region. In terms of product categories, Under Armour’s apparel and footwear sales rose 5.3% and 2.4%, respectively, while its accessories sales fell 5.2% in 2018.
The company is optimistic about its growth opportunities in existing and new international markets. Under Armour expects revenue growth of ~3%–4% in 2019 with flat revenue growth in the North American region. Its international revenue is expected to rise in the low double digits. Analysts expect Under Armour’s revenue to rise 3.3% to $5.36 billion in 2019.