Under Armour (NYSE: UA) has reported their earnings for Q4 2019.
Revenue came in at $1.40B which missed analysts’ expectations of $1.465B
EPS was -$0.03 which missed analysts’ expectations of $0.11, although this seemingly big miss was because of a one time tax expense costing $0.05 per share and a one time impairment cost coming in at a cost of $0.08. Although even without these charges, EPS would have come in at $0.10 which still would have missed analysts’ targets.
More concerning though, the company announced it may halt the opening of its flagship New York City store. As well as giving weak guidance for 2020, this earnings report unsettled many investors who sold off the stock en masse. The stock is currently down over 16% as of this morning.
Before this current big drop, the stock has been flat for the past year. However, taking a look at the 5 year chart, the stock has been absolutely hammered since its all time highs back in 2015 and has lost more than half its value since then. A closer look at the company tells us why.
Burning Money And Picking Fights
In fiscal 2017, the company posted its first net loss in over 15 years. This nightmare scenario also came in around the same time with the news that the then-CFO Chip Molloy, was resigning after only 13 months on the job. The stock tanked 23% the day that his resignation was announced. The company blamed lackluster sales and increasing competition internationally for its troubles.
The company has also garnered some unwanted attention due to its controversial CEO Kevin Plank, who has been vocally supportive of the administration of President Donald Trump who is deeply unpopular with many professional athletes and famous celebrities with whom Under Armour has contracts with. Many athletes including Stephen Curry, the most valuable of the company’s sponsorships, hinted that his loyalty to the company could be jeopardized if its actions do not reflect his values.
Plank has also gotten in trouble in the past for visiting strip clubs with other executives and paying for the bill on the company card. Plank has also been accused of sexist behavior such as hiring female employees based on attractiveness. It seems like the board has finally had enough of Plank’s behavior as it was announced that he would be stepping down from the CEO role starting January 1st, 2020. The COO, Patrik Frisk, has replaced Plank has CEO and it remains to be seen whether he can turn the company around.
Until we see some more solid results, it would appear that Under Armour stock is dead in the water. The company is currently in turnaround mode and in decline while the stock market in general is experiencing one of the longest bull runs in history. It is hard to justify why anyone should buy this stock when there are many other companies that are experiencing tremendous growth.
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