Over the last few months I’ve been writing a number of articles discussing various factors that have seen the stock price of UA declining. In this mornings 3rd Quarter report UA rattled off an impressive amount of accomplishments, but the core of the discussion was a clear bait and switch as Plank disclosed the one thing a profit driven share company relies on, growth.
At L2 Scott Galloway stated, “revenue is the beast that kills companies.” When a stock has been generating revenue for its shareholders the last thing they want to hear is a company won’t hit its target in the upcoming quarter. NPD’s Matt Powell shared this tweet this morning, “Under Armour warns on its conference call of Q4 revenue growth below expectations (+20% vs. 22% consensus).” This one statement from Plank sent the shares spiraling down again. The stock now sits at a low of 32/share!!!! Here is something to note:
October 28, 2016 the stock grew to 48/share
January 20, 2016 the stock dropped to 33/share
April 21, 2016 the shares reached 46.99 and since this point it has been very erratic and was basically hovering between 38 and 42/share and then Plank sold off shares, which has happened before, but at a time when the shares were fluctuating this was a flag and now today’s info of decreased growth.
I’ve discussed several factors over the last few months in this article in particular: http://www.arch-usa.com/insider-ties-why-kevin-planks-sales-are-nothing-for-under-armour-shareholders-to-sweat/
If you’re too busy to read this post, this is what I wrote in short:
UA is looking to attach itself to the athleisure sportswear market. You know jogger pants, casual athletic slacks and apparel for an athletic lifestyle… You know, fashion. Here is the problem with pursuing this route, much like mentioned before in attempting to advertise against adidas and Nike, sportswear is sold by dope ass people. When your dope ass person is Steph Curry, nobody is rocking with that. In order to gain a share of the market UA will have to drive people into stores where they are given shelf space. I can’t see Kith or FC or Burn Rubber or any of the sneaker boutiques actually carrying the UA casual wear line and I can’t see Nordstroms or Barney’s carrying it. The brand is going to end up dropping this huge investment into UA branded stores at a huge discount. Which will drive down the growth of last quarter and will end up keeping the shares at or below 40.
Now, when I said the last quarter the company was in the 3rd quarter, which looks good on paper when you click on the source link, but in reality I was discussing the 4th quarter. Now even Plank states that the company won’t hit projections and his sell off of stock early this year looks more calculated than it was assumed. I’m amazed no one has thought about that. Under Armour gave the shareholders too much of a good thing and their growth will actually be their Achilles’ heel. Their bigger Achilles?
- Their inability to create marketing campaigns that generate emotion.
- Their lack of developing brand ambassadors. Plank discusses the recent Asia tour of Steph Curry and how much growth will take place abroad. The reality is its the lack of Steph in the US market that is hurting them as well as some dumb ass decisions with the 2.5 which did not sell well.
- The increase in price of the Curry 3
- Sports Authority’s ghost. A lot of the revenue from apparel and footwear was in the now bankrupt company. No other company has replaced that income.
- The UAS campaign is flawed and is draining resources. UA isn’t Amazon and when the UAS division shows a loss, it will continue to dampen enthusiasm.
UA still showed growth. They have made several critical errors that can be fixed, but I don’t know if the shares will ever reach that magical number 50 again and obviously neither does Plank.