Under Armour’s shares are tumbling today after the company’s fourth-quarter earnings as well as its guidance for the year ahead fell short of expectations.
As of 10:35 a.m. ET, the stock remained down nearly 22 percent, to $19.63.
Kevin Plank, the Baltimore-based brand’s founder and chief executive, blamed “numerous challenges and disruptions” in the North American region for creating an “imbalance” in the firm’s product assortment and hurting its overall performance during the quarter.
“In the fourth quarter, slower traffic caused significant promotional activities earlier, deeper and broader than expected,” Plank said during the company’s conference call. “This commoditized some of our more basic core product that had previously sold through for us in years past. This, in addition to higher demand for more lifestyle silhouettes, caused us to be out of balance with our assortment.”
Plank added that the fallout from retail bankruptcies last year exacerbated the issues.
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“There was also lower channel recapture of bankruptcy volume that we’d expected as pricing came down in the points of distribution that we serve,” Plank said.
(Under Armour said last May that it had originally planned to bring in $163 million in revenues from Sports Authority in 2016 but would only recognize $43 million after the company went bankrupt.)
Under Armour said its fourth quarter revenues were up 12 percent, to $1.3 billion, but it was just shy of Wall Street’s bet for revenues of $1.4 billion.
Net income slipped 1 percent to $105 million, or 23 cents per diluted share, missing analysts’ forecasts for diluted earnings per share of 25 cents.
The company said Q4 sales were driven by a 5 percent increase in wholesale revenues and a 23 percent increase in direct-to-consumer revenues. North American revenues grew 6 percent, while international revenues, which represented 16 percent of total revenues in the quarter, were up 55 percent. Helped by growth in its basketball segment — driven by NBA star Stephen Curry — footwear revenues increased 36 percent, to $228 million.
Full-year revenues for the firm were up 22 percent, to $4.8 billion, and net income grew 11 percent, to $259 million. Diluted EPS were 45 cents per share for Class A and B shares and 71 cents per share for Class C shares. Adjusted diluted EPS for all classes for 2016 were 58 cents per share.
Looking ahead, Under Armour expects its net revenues to grow 11 to 12 percent to almost $5.4 billion, up 12 to 13 percent currency neutral. Operating income is expected to shed about $100 million year-over-year, to $320 million.
“Given lower-than-anticipated revenues, while we are immediately taking measures, we can’t reduce our SG&A spend enough in the near term to match our revenue opportunity for meaningful impact in 2017,” Plank explained during the call. “Second, strategically, we believe it is critical that we maintain our investments in innovation and our footwear, international and DTC to ensure we reach the opportunity that we see for these businesses.”
The firm also announced today that CFO Chip Molloy has decided to leave the company due to personal reasons. Effective Feb. 3, David Bergman, SVP of corporate finance, will serve as acting CFO. Molloy — who participated in his final conference with Under Armour today — will remain with the company in an advisory capacity to assist with the transition.