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Category: Stock Market and Under Armour
Date: 6 July 2020 Stock Price of Under Armour: $9.58 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Under Armour a leading manufacturer of performance athletics apparel. The stock of Under Armour has been under pressure for a very long time and the stock continues its consistent downward spiral.
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About Under Armour
Under Armour, Inc., headquartered in Baltimore, Maryland, is a leading inventor, marketer and distributor of branded athletic performance apparel, footwear and accessories. Powered by one of the world’s largest digitally connected fitness and wellness communities, Under Armour’s innovative products and experiences are designed to help advance human performance, making all athletes better
Overview of Under Armour's 1st quarter 2020 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Net revenues: $930.240 million (down from $1.204 billion for the same quarter of the previous year)
- Net revenues decreased by -22.7% over the last 12 months
- Cost of goods sold: $499.256 million (down from $659.935 million for the same quarter of the previous year)
- Cost of goods sold decreased by -24.3% over the last 12 months
- Net loss: -$589.681 million (down from $22.477 million for the same quarter of the previous year)
- Diluted loss per share: -$1.30 (down from $0.05 for the same quarter of the previous year)
- Number of shares in issue: 452.871 million (down from 453.230 million for the same quarter of the previous year)
- Cash and cash equivalents: $959.318 million
- Cash and cash equivalents per share: $2.11
- Cash and cash equivalents makes up 22.1% of Under Armour's market capital
- Cash and cash equivalents makes up 19.8% of Under Armour's total assets
- Accounts receivable: $668.409 million
- Accounts receivable makes up 13.8% of Under Armour's total assets
- Inventories: $940.236 million
- Inventories makes up 19.4% of Under Armour's total assets
- Goodwill in Under Armour: $485.672 million
- Goodwill per share: $1.07
- Goodwill makes up 11.2% of Under Armour's total assets
- Stockholders equity in Under Armour: $1.550 billion
- Stockholders equity per share: $3.42
- So Under Armour is trading at 2.8 times its stockholders equity per share which is well within the expected range of between 2 and 4 times that most firms tend to trade at
- Net Cash used in operations: -$366 million
Under Armour (NYSE: UAA) management commentary on 1st quarter 2020 earnings
BALTIMORE, May 11, 2020 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the first quarter ended March 31, 2020.
"As extraordinary human and economic disruptions related to COVID-19 continue to unfold globally, we are prioritizing the health and welfare of our teammates and consumers," said Under Armour President and CEO Patrik Frisk. "By instituting disciplined workplace continuity protocols and adhering to the recommendations of local health authorities, we remain vigilant in monitoring this evolving situation and responsibly playing our part."
"During the first quarter, our results in January and February were tracking well to our plan. Since mid-March, as the pandemic accelerated dramatically in North America and EMEA and retail store closures ensued, we've experienced a significant decline in revenue across all markets." Frisk continued, "As a result, like so many businesses, we've had to make very difficult decisions, including temporarily laying off teammates in our U.S. retail stores and distribution centers along with other actions to ensure we protect Under Armour's financial stability."
Frisk concluded, "As we continue to navigate this crisis, our balance sheet remains well managed, and our leadership team is taking decisive actions to execute against our continued transformation. We remain focused on driving greater efficiencies across the core elements of our business by working to identify additional opportunities to emerge with stronger and greater capabilities over the long-term."
"As extraordinary human and economic disruptions related to COVID-19 continue to unfold globally, we are prioritizing the health and welfare of our teammates and consumers," said Under Armour President and CEO Patrik Frisk. "By instituting disciplined workplace continuity protocols and adhering to the recommendations of local health authorities, we remain vigilant in monitoring this evolving situation and responsibly playing our part."
"During the first quarter, our results in January and February were tracking well to our plan. Since mid-March, as the pandemic accelerated dramatically in North America and EMEA and retail store closures ensued, we've experienced a significant decline in revenue across all markets." Frisk continued, "As a result, like so many businesses, we've had to make very difficult decisions, including temporarily laying off teammates in our U.S. retail stores and distribution centers along with other actions to ensure we protect Under Armour's financial stability."
Frisk concluded, "As we continue to navigate this crisis, our balance sheet remains well managed, and our leadership team is taking decisive actions to execute against our continued transformation. We remain focused on driving greater efficiencies across the core elements of our business by working to identify additional opportunities to emerge with stronger and greater capabilities over the long-term."
COVID-19 Overview
The coronavirus (COVID-19) pandemic has negatively affected the U.S. and global economies, disrupted supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to "shelter-in-place". Amid this global crisis, Under Armour is focused on protecting the health and safety of our teammates and consumers, while working with our customers and suppliers to minimize potential disruptions and supporting our community to address challenges posed by this pandemic. The following provides an overview and status of certain parts of our business and some of the actions we are taking in response to this situation:
The coronavirus (COVID-19) pandemic has negatively affected the U.S. and global economies, disrupted supply chains and financial markets, and led to significant travel and transportation restrictions, including mandatory closures and orders to "shelter-in-place". Amid this global crisis, Under Armour is focused on protecting the health and safety of our teammates and consumers, while working with our customers and suppliers to minimize potential disruptions and supporting our community to address challenges posed by this pandemic. The following provides an overview and status of certain parts of our business and some of the actions we are taking in response to this situation:
- Business Continuity – as the virus spread rapidly during the first quarter, we began adjusting our operations and taking measures to ensure business continuity, as well as implementing government recommendations to increase social distancing, avoid large gatherings and requiring most office-based teammates around the world to work remotely. Within our supply chain, we quickly adjusted our plans and strategy to manage rapidly changing dynamics in sourcing, logistics and transportation.
- Channel & Business Impacts
- Asia-Pacific: in China, which comprises a little more than half of our revenue in this region, both owned and partner doors began closing in late January and remained substantially closed through early March when a slowly progressive re-opening process started. By the end of March, more than 80 percent of these locations had re-opened in China and, at this time, substantially all have re-opened. However, traffic in these locations, while recovering steadily in recent weeks, continues to be down year-over-year. Business results and trends in South Korea have been similar to those in China, while retail and partner locations outside of these countries in the Asia-Pacific region have remained predominantly closed since the end of the first quarter.
- North America / EMEA / Latin America: beginning mid-March, the company temporarily closed all owned doors across all three of these regions. In addition to these locations, the vast majority of wholesale customer stores where our products are sold also closed down beginning mid-March. At the time of this communication, substantially all of our owned doors and those of our retail partners remain closed. The pace and timing of store openings, and traffic patterns when the stores re-open, remain highly uncertain.
- Global eCommerce: within our owned eCommerce business, which represents a low double-digit percentage of total revenue, we have seen more favorable trends materializing in North America and EMEA since the beginning of the second quarter.
- Financial Impact and Related 2020 Outlook – following the withdrawal of our 2020 outlook on April 3, local market policies and procedures required to decrease COVID-19 transmission remain largely unchanged around the world. Accordingly, due to the high level of uncertainty with respect to the duration and scope of this current event, the quantification of negative impacts on our financial and operating results cannot reasonably be estimated at this time.
- Cost Base Management – we are expecting to reduce our originally planned 2020 operating expenses by approximately $325 million through various initiatives, including:
- Taking actions to limit broader marketing activations until we have greater visibility into the magnitude of virus impact on consumer demand and behavior.
- Reducing incentive compensation.
- Temporarily laying off teammates that worked in our owned retail stores and U.S.-based distribution centers.
- Tightening our hiring, contract services and travel and other discretionary and variable costs.
- Postponing planned capital expenditures contributing to reduced depreciation.
- Realizing the operating expense benefits included within the approximate $40 million to $60 million of expected pre-tax savings in 2020 from our restructuring plan.
- Liquidity and Cash Flow – given ongoing uncertainty and pressures in global markets, we moved quickly to prioritize liquidity, cash preservation, and inventory management to enhance our ability to navigate potential short and mid-term challenges:
- We ended the first quarter with cash and cash equivalents of $959 million, of which approximately $600 million was related to borrowings under our revolving credit facility. We currently have $700 million outstanding under this facility. Additionally, we are in the process of amending our credit agreement, which is on track to close tomorrow. Given the ongoing disruption throughout our industry, we expect this amendment will provide improved access to liquidity going forward.
- We ended the quarter with inventory up 7 percent to $940 million. In anticipation of significant changes in future demand, we are proactively reducing planned inventory receipts amid the quickly evolving retail environment.
- We have been prudently balancing the negotiation of extended payment terms with both our customers and vendors.
- We have reduced our planned capital expenditures to approximately $100 million compared with our previous expectation of approximately $160 million in 2020, with original investments generally expected to continue at such point business conditions stabilize.
Under Armour (NYSE: UAA) stock price history
The image below obtained from Google, shows the stock price history of Under Armour over the last 5 years. And its been a very miserable time for Under Armour stockholders. 5 years ago the stock of Under Armour was trading at around $43 a stock and its currently trading at $9.58 a stock. That's a loss of -77.8% suffered by Under Armour stockholders over the last 5 years.
The stock of Under Armour is trading at a lot closer to its 52 week low of $7.15 than it is to its 52 week high of $27.72 a stock, which to us is a clear indication that the short term sentiment and momentum of Under Armour stock is very negative at this point in time,
The stock of Under Armour is trading at a lot closer to its 52 week low of $7.15 than it is to its 52 week high of $27.72 a stock, which to us is a clear indication that the short term sentiment and momentum of Under Armour stock is very negative at this point in time,
Recent coverage of Under Armour
The extract below discusses the latest regarding Under Armour as obtained from Fool.com
This past weekend, athletic apparel company Under Armour (NYSE:UA) (NYSE:UAA) informed collegiate sports powerhouse UCLA that it wanted out the 15-year, $280 million sponsorship deal it signed in 2016. That agreement put the brand in the spotlight by putting its logo on the school's athletic uniforms. But, as the statement from Under Armour explains, "[W]e have been paying for marketing benefits that we have not received for an extended time period."
Under Armour didn't specify if the "extended period of time" in question was solely due to coronavirus-related cancellations or if it had more to do with UCLA's somewhat diminished reputation of late as a sports powerhouse. Either way, it costs the apparel maker nothing to at least try to back out of an unfruitful arrangement.
It wouldn't be naive of investors to wonder, however, if the proposed end to the largest collegiate athletics sponsorship deal on record actually points to a much bigger fiscal problem for the company.
Par for the course
Massive deals between sports brands and colleges are nothing new. Nike (NYSE:NKE) inked a deal with The Ohio State University back in 2016 worth $252 million. Adidas (OTC:ADDD.F) is prepared to pay the University of Kansas $14 million per year for the next 14 years to be the brand associated with the school's athletic programs.
It's not just schools, either. Nike has named NBA star Lebron James a lifetime partner in a deal that's ultimately worth more than $1 billion to the basketball phenom. Soccer star Lionel Messi has a career-long deal with Adidas that nets him at least $10 million per year.
It's Under Armour, however, that's arguably the least discriminate and most generous in paying for celebrity endorsements. Basketballer Steph Curry, the NFL's Tom Brady, professional golf standout Jordan Spieth, and even wrestler-turned-actor Dwayne "The Rock" Johnson have all been or are still a part of Under Armour's stable of superstars, just to name a few. Eight-figure deals are common, while nine-figure deals aren't unusual.
The problem: Under Armour's associations with a growing number of sports superstars and high-profile collegiate programs aren't paying for themselves like they used to. The move to negate the deal with UCLA could in some ways be a sign of what's to come, including fewer and smaller deals
Read the full article here
This past weekend, athletic apparel company Under Armour (NYSE:UA) (NYSE:UAA) informed collegiate sports powerhouse UCLA that it wanted out the 15-year, $280 million sponsorship deal it signed in 2016. That agreement put the brand in the spotlight by putting its logo on the school's athletic uniforms. But, as the statement from Under Armour explains, "[W]e have been paying for marketing benefits that we have not received for an extended time period."
Under Armour didn't specify if the "extended period of time" in question was solely due to coronavirus-related cancellations or if it had more to do with UCLA's somewhat diminished reputation of late as a sports powerhouse. Either way, it costs the apparel maker nothing to at least try to back out of an unfruitful arrangement.
It wouldn't be naive of investors to wonder, however, if the proposed end to the largest collegiate athletics sponsorship deal on record actually points to a much bigger fiscal problem for the company.
Par for the course
Massive deals between sports brands and colleges are nothing new. Nike (NYSE:NKE) inked a deal with The Ohio State University back in 2016 worth $252 million. Adidas (OTC:ADDD.F) is prepared to pay the University of Kansas $14 million per year for the next 14 years to be the brand associated with the school's athletic programs.
It's not just schools, either. Nike has named NBA star Lebron James a lifetime partner in a deal that's ultimately worth more than $1 billion to the basketball phenom. Soccer star Lionel Messi has a career-long deal with Adidas that nets him at least $10 million per year.
It's Under Armour, however, that's arguably the least discriminate and most generous in paying for celebrity endorsements. Basketballer Steph Curry, the NFL's Tom Brady, professional golf standout Jordan Spieth, and even wrestler-turned-actor Dwayne "The Rock" Johnson have all been or are still a part of Under Armour's stable of superstars, just to name a few. Eight-figure deals are common, while nine-figure deals aren't unusual.
The problem: Under Armour's associations with a growing number of sports superstars and high-profile collegiate programs aren't paying for themselves like they used to. The move to negate the deal with UCLA could in some ways be a sign of what's to come, including fewer and smaller deals
Read the full article here
Under Armour (NYSE: UAA) stock valuation
So what do we value Under Armour stock at after the release of their 4th quarter 2019 earnings report? Based on Under Armour earnings report our valuation models provides a target price (full value price) for Under Armour at $15.40 a stock (up slightly from our 3rd quarter 2019 earnings report valuation of Under Armour). We therefore believe that the stock of Under Armour is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $15.40 therefore we believe a good entry point into Under Armour stock is at $13.90 or below. We expect the stock of Under Armour to continue its downward slide especially after the weak fiscal guidance and the announcement of a restructuring plan.
Since Under Armour is trading at well above our suggested entry price and the investigations into accounting malpractices are taking place and their outlook is weakening we rate the stock of Under Armour as AVOID
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $15.40 therefore we believe a good entry point into Under Armour stock is at $13.90 or below. We expect the stock of Under Armour to continue its downward slide especially after the weak fiscal guidance and the announcement of a restructuring plan.
Since Under Armour is trading at well above our suggested entry price and the investigations into accounting malpractices are taking place and their outlook is weakening we rate the stock of Under Armour as AVOID
Next earnings release of Under Armour
It is expected that Under Armour will publish their 2nd quarter 2020 earnings report in late August 2020