Annual investor day sounds like it should be a celebratory occasion, but it was nothing of the sort today for Under Armour, Inc, whose shares were down 10 percent at the start of the day on worries about the company’s future growth potential and increasing softness in North American sports apparel interest.
Indeed, during the company’s annual meeting with investors, Under Armour slimmed its earnings outlooks for the fiscal 2018 year. This narrowing now calls for adjusted earnings per share within the range of 21 to 22 cents, compared with the 19 to 22 cents range assessed prior. And then, looking forward to next year, Under Armour said they can expect earnings per share to fall between 31 and 33 cents, compared with an earlier analysis of 35 cents. In addition, analysts had expected sales to grow by 5 percent but 2019 sales forecast look to be “relatively flat” in North America with a bump of only about 3 or 4 percent.
That in mind, Under Armour is calling now for low single-digit revenue growth in North America between 2020 and 2022. After this, the company predicts low single-digit revenue US growth in 2023, though the international segment is likely to cover at least 40 percent of total sales.
This may be quite a stark turnaround for a company who began the year as one of the most exciting successes on the market. Under Armour, after all, jumped more than 70 percent in just the past year. But while the growth was massive, all growth has a cap, and analysts now argue that Under Armour Inc may have hit theirs.
In fact, many analysts have given the Under Armour Inc stock a ‘sell’ rating, despite its stellar year. The argument is that investor expectations are already elevated, and that suggests the company’s ledger will quickly slide into high single-digit earnings before realizing interest and tax margins on the high single-to-low double-digit revenue growth within the outlook period.
And then, the Wall Street Journal had also independently reported that at least two of Under Armour’s marketing executives have left the company after an initial review questioned the company’s corporate spending practices. Anytime executives leave a company it can shake the stock but when these executives voluntarily depart on the concern of the company’s proprietary practices, that can really have an impact on investor decisions.