Under Armour (NYSE: UAA) shares were more than 15% lower despite the company's strong Q4 earnings report which showed it topping analysts' estimates on the top and bottom-line. An earnings beat followed by a brutal selloff has been the standard for retail stocks during this earnings season as investors seem to be discounting a slowing of consumer spending.
At one point, Under Armour was a momentum stock as many people believed it could be the next Nike (NYSE: NKE). This sent shares up more than five-fold between 2012 and 2015. Since then, shares have peaked and are down more than 60%. Despite the poor performance, the company has steadily improved its financial performance and is now attractively valued.
Inside the Numbers
In Q4, Under Armour reported earnings per share of $0.14, beating expectations of $0.07 per share. This was 40% lower than last year. Revenue came in at $1.53 billion vs. $1.47 billion, a 9% increase from last year.
North American revenue was 15% higher, while international sales were up 3%, and digital sales grew 4%. Currently, online sales account for 42% of direct to consumer revenue. Apparel sales grew 18%, footwear was 17% higher, however accessory sales declined 27%. This category spiked during the coronavirus as more people choose to engage in outdoor activities.
For the next quarter, it sees sales growing by mid-single-digits, a slight upgrade from its previous forecast of low single-digit growth. It also sees supply chain issues and transportation bottlenecks affecting its available inventory for its own stores and third-party sellers. It also sees EPS between $0.02 and $0.03 due to higher freight costs.
The company's current focus is on increasing its price point and focusing on more premium customers. Another aspect is to do a better job of engaging customers digitally and grow that recurring sales channel.
Under Armour shares have a P/E of 21 which is in line with the market average. Investors who believe in the brand, and the company's ability to capitalize on new growth opportunities should pick up shares as they are at their cheapest valuation in its entire history.