Dick’s CEO Backs Under Armour’s New Direction, But Not All Analysts Are Convinced

Under Armour is pushing ahead with its turnaround plans, and at least one of its wholesale accounts has given it the seal of approval.

On Wednesday, Dick’s Sporting Goods reported first quarter earnings, and on a call with investors and analysts, CEO Ed Stack said the company is “very pleased with what’s going on with Under Armour and the direction forward.” While he declined to go into specifics, he said “the progress that Under Armour has made, especially in our men’s business, is really quite good.”

The callout was notable in part because Dick’s blamed the athletic brand’s strategies for its own weak sales in the second quarter of fiscal 2018. At the time, Stack said the company “experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution.” He added, “We are very confident our sales trajectory will improve next year as these headwinds are expected to subside.”

Indeed, the national sporting goods retailer kicked off the fiscal year with earnings and sales that topped analysts’ expectations, though its stock closed down more than 5%, possibly due to a wave of downbeat results reported throughout the retail sector.

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Under Armour, too, came in ahead of forecasts for the first quarter, posting profits of $22.5 million, or 5 cents per diluted share, compared with the loss of 1 cents per share analysts had predicted.

Wall Street’s assessments of the company remain mixed: Susquehanna Financial LLLP analyst Sam Poser reiterated the firm’s “negative” rating on the stock last month, calling out the threat of the brand’s competitors.

“Our industry checks indicate a lack of enthusiasm and interest for Under Armour product from retail partners,” Poser wrote in a research note. “With Nike firing on all cylinders and heritage brands such as Champion, Fila and others re-emerging, we see little sign Under Armour will reclaim lost shelf space anytime soon.”

JPMorgan analyst Matthew Boss is more bullish on the firm’s fate, particularly as it has put its restructuring plans into action.

Earlier this month, Boss appeared on CNBC’s “Fast Money Halftime Report,” and said “the fire seems to be back” for the company.

“They rationalized SKUs by 50%, they’ve cut their vendor base by 30%, [and] they’ve shortened the lead times by 25%,” he said. “They’re overhauling the marketing heading into next year, and we expect the new product to match the inventory reduction of 24%, and so you see more full-price selling with the expense base rationalized.”

He upgraded the retailer’s stock from neutral to overweight and lifted his price target to $29, from $23. Currently, Under Armour’s share price sits at $22.80.

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