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Under Armour Shares Tank 28% After Disastrous Earnings Report

From Under Armour Inc (NYSE:UAA) early Tuesday posted weaker than expected earnings, issued a tepid outlook, and announced its CFO was resigning, causing its shares to crater in early trading.

The Baltimore-based athletic apparel maker reported Q4 EPS of $0.23, which was $0.02 worse than the Wall Street consensus estimate of $0.25. Revenues rose 11.7% from last year to $1.31 billion, also missing analysts’ view for $1.41 billion.

Under Armour noted that North American revenues grew 6% in the latest period, while International revenues surged 55%. International sales now represent about 16% of UA’s total revenues. The company saw significant growth in the U.K., Germany, China and Australia.

Q4 apparel revenues rose 7%, while Footwear and Accessories revenues gained 36% and 7%, respectively. Gross margin fell to 44.8%, however, down from 48% in the year-ago period. In a related note, inventory jumped 17% to $917 million, as the company attempts to use discounts to offset weaker than expected demand.

Looking ahead, Under Armour forecast 2017 revenues to rise 11% to 12% from 2016 levels, which implies revenues of $5.4 billion. That’s a far cry from the $6.06 billion analysts are projecting for 2017. bln Capital IQ Consensus Estimate.
Gross margin is expected to be slightly down y/y.

UA’s Chief Financial Officer, Chip Molloy, is also stepping down for personal reasons, the company said.

Despite the bevy of bad news in the report, Under Armour attempted to stay positive in its press release:

“We are incredibly proud that in 2016, we once again posted record revenue and earnings, however, numerous challenges and disruptions in North American retail tempered our fourth quarter results,” said Kevin Plank, Under Armour Chairman and CEO. “The strength of our Brand, an unparalleled connection with our consumers and the continuation of investments in our fastest growing businesses — footwear, international and direct-to-consumer — give us great confidence in our ability to navigate the current retail environment, execute against our long-term growth strategy and create value to our shareholders.”

Under Armour Inc shares fell $8.04 (-27.78%) in premarket trading Tuesday. Prior to today’s report UAA had declined -0.38% year-to-date, versus a +1.80% rise in the benchmark S&P 500 index during the same period.

UAA currently has a POWR Rating of D (Sell), and is ranked #23 of 32 stocks in the Athletics & Recreation category.

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