Stock Story -
What Happened: Shares of athletic apparel company Under Armour (NYSE:UAA) fell 11.6% in the morning session after the company reported first-quarter earnings results. The big news is a restructuring that Under Armour is initiating. To explain the rationale of the restructuring, the company's CEO stated that "Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions to build a premium positioning for our brand, which will pressure our top and bottom line in the near term". Because of this, Under Armour provided full-year guidance that was well below expectations for sales and EPS, as the company will have to endure some shorter-term pain to rightsize the business for the longer term.
In addition, revenue came in roughly in line with expectations during the quarter, reflecting some of the concerns management called out. North American revenue fell -10% year on year, while sales in the international business grew 7%. However, the trend is expected to continue as the full-year FY'2025 sales guidance includes expectations for a 15% to 17% decline in North America, while the International business is expected to record a low-single-digit percent decline.
Amidst the new developments, management demonstrated the focus on returning value to shareholders by announcing the repurchase of up to $500 million of its common stock over the next three years.
Overall this was a challenging quarter for the company, given the weak near term outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Under Armour? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Under Armour's shares are quite volatile and over the last year have had 12 moves greater than 5%. But moves this big are very rare even for Under Armour and that is indicating to us that this news had a significant impact on the market's perception of the business.
Under Armour is down 20.7% since the beginning of the year, and at $6.89 per share it is trading 26.8% below its 52-week high of $9.40 from December 2023. Investors who bought $1,000 worth of Under Armour's shares 5 years ago would now be looking at an investment worth $314.47.