Foot Locker beat earnings views Friday but a comment on Under Armour’s shoe for NBA star Steph Curry appears to be hitting shares of the athletic gear maker.
Investor’s Business Daily took the time to post information that sent Under Armour into a tailspin… again… for the second time in less than a month. If you’ve been following the site and reading about my issues with Under Armour’s approach to marketing and the launch of the Curry 3, you know I haven’t been raving about the kicks. I’ve also been saying over and over that at some point maybe they should not keep doing what they’ve always done.
Alright, let me be clear. The stock was up 2/share since it crashed in October. Today, the stock is down again. To be exact:
October 19th the stock was 38.82/share.
October 25th Kevin Plank had a conference call about the UA’s 3rd Q and the stock tumbled to 32.89/share
November 3rd the stock appeared to bottom out. I wrote an article explaining that the market panicked for no reason. Plank’s report was actually solid, but they had been growing so much and giving their shareholders dividends, that saying “no more dividends while we grow” was seen as a negative. The price reached 30.30/share
November 17th, yesterday, the shares moved to 32.31. Footlocker had its Quarter 3 meeting yesterday and during this meeting they made a simple statement that has now led to another drop.
Foot Locker CEO Richard Johnson noted that the Curry 2.0 and 2.5 shoes “performed well” during Q3 but the Curry 3.0, which came out Oct. 27, “started off a bit slower than the two previous models,” according to Dow Jones, though he acknowledged that it’s still early.
Under Armour shareholders have to be the shakiest investors in the market. The Curry 3 has only been available for about 3 weeks. Granted I’ve been giving UA hell for the speed of their marketing team and the really ridiculous investment of energy into UAS, but Under Armour is a strong company. I still think that the shares will rebound and reach 38-40/share. The brand is only a few moves from growing their footwear division which will improve their growth overall, although the margins are not that big on footwear due to distribution and wholesale.
I do understand that shareholders are nervous. Let’s put it like this, if a company has had three years to improve their roster of athletes to increase their share of the market, but they don’t even update their sponsor page that does speak to how fractured their marketing team must be. You can’t grow a footwear division by creating a NYFW line that has minimal distribution. You don’t grow footwear by creating Tough Mudder shoes. You have to dig in and do the marketing you said you were going to do when you spoke to your shareholders on October 25th.
I am still bullish on UA Stocks, but I guess the shareholders definitely have a reason to sell.
See also this report by Nick Turner: http://www.bloomberg.com/news/articles/2016-11-18/under-armour-declines-over-fears-that-steph-curry-shoe-is-a-flop