Overheard at a Hotel Bar

Dear Rundown Reader,

A few months ago a colleague visited Under Armour CEO Kevin Plank’s new Pendry Hotel not far from our offices in downtown Baltimore.

The hotel is gorgeous. Infinity pool. Luxurious rooms. Sweeping views. The works.

As our colleague toured the hotel, he happened into a conversation with an Under Armour executive who worked at the company headquarters across town.

Next thing you know, as the story was reported to your editor, our colleague and this Under Armour exec are at the hotel bar, sampling Sagamore Rye.

Sagamore is Plank’s recently established whiskey brand and distillery.

As our colleague’s conversation with this exec continued, the exec noted stores have more inventory of Under Armour product on hand than they know what to do with.

Inventory, as you know, needs to move. If it sits around, it’s a bad sign.

The shine has long since worn off Under Armour’s epic rise. Once Nike’s biggest competition of the next generation, Under Armour’s now competing for shelf space at Kohl’s.

Hotels and whiskey. Or a successful company. There are choices in life, Mr. Plank.

Today we take a look at Under Armour’s recent earnings. Early payoff: One nice surprise doesn’t change a cloudy outlook.

Your Rundown for Wednesday, February 14, 2018…

Under Armour Under the Gun

Reporting Monday afternoon, executives on the Under Armour (NYSE: UA) earnings call noted quarterly revenue was up 4.58% to $1.37 billion. Sounds good.

But the net loss per share came to $0.20 after UA put up a positive $0.23 a share in the same quarter last year. After restructuring costs, earnings per share came out at basically breakeven.

Small victories.

The funny part is, those results beat or at least met the majority of analyst expectations.

In response, shares soared through premarket trading Tuesday.

The momentum continued through the day with shares closing at $16.70. That’s up over 17% from the prior close of $14.23 Monday.

It stands as one of UA’s “best days ever,” as one CNBC headline put it. Really?

Here’s the chart.

In 2015 shares hit an all time high of $53. Since then it’s been a slow and painful slide.

Shares haven’t risen above the 200-day moving average since September 2016, as reported by Investors Business Daily.

Analysts set the bar extremely low for UA. And the company barely met the number.

Mark Tepper, president of Strategic Wealth Partners called UA “a sucker bet,” to CNBC.

Doubling down he notes: “We don’t see very many positives. There’s a lot of negatives.”

One negative is decreased demand for marquee products like the Curry 3 sneaker, whose launch underwhelmed last year.

But it’s not lack of demand for shoes, its the lack of demand for UA shoes that’s the real story.

Forbes, ABC News, ESPN and others noted last year what a disappointment the Curry shoes were.

Meanwhile, Adidas’ sneaker sales in the U.S. increased more than 50% in 2017, according to Bloomberg.

Nike and Adidas aren’t worried anymore. UA’s an afterthought.

Make Nike worry. Trademark pending. UA’s new mantra.

Of course, no one asked us. But there you have it.

One good day doesn’t change the fact that UA faces serious challenges. Beware the spikes you sometimes see after an earnings report.

Now, turning to the markets this morning…

Market Rundown for Wed., February 14

S&P 500 futures are up 11.75 this morning at 2,673.

Oil’s down $0.42 at $58.77. Tough couple of weeks for oil.

Gold’s up $2.90 at $1,333. We’ll get excited when we see that big breakout above $1,450. When’s that coming? You tell us.

Bitcoin goes for $9,189 this morning according to CoinDesk.

We’ll talk again on Friday.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

 

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Aaron Gentzler

Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown and has been with Agora Financial / Seven Figure Publishing since 2005. He's been covering technology and markets for over a decade.

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