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Author: Alan LittleDate: 2022-02-14

Under Armour (UA) -11% as supply chain issues hit inventory

Sports equipment company Under Armour (UA) closed 11% down on Friday after it said that supply constraints have reduced its orders for spring and summer.

Under Armour (UA) shares slipped 11.37% on Friday after the sports equipment company’s warning that spring and summer orders will be hit by supply chain problems took the shine off its Q4 beats.

After Thursday’s close, Under Armour said that earnings per share for the quarter to 31st December climbed 16.7% to $0.14, which was seven cents ahead of Wall Street expectations.

Group revenues also eased 9% higher to $1.5bn to again trump the $1.47bn consensus as consumer demand for clothing products strengthened.

However, Under Armour is the latest corporation to run into supply constraints triggered by the pandemic, and it expects these “headwinds” to negatively affect its orders in Q1 and Q2.

Profit margins will also be under pressure and could fall by 2.4% if higher freight costs and the turbulent supply chain environment continues.

That was enough to spook investors on Friday, even though Under Armour guided for higher revenue growth in Q1, with the 4% to 6% rise an improvement on the prior “low-single-digit” forecast.

CEO Patrik Frisk hailed the company’s “record” revenue and earnings in a statement and said that the company was focused on delivering “sustainable, profitable growth” for shareholders.

BMO Capital Markets’ Simeon Siegel offered an upbeat assessment as he said that the 9% decline in Under Armour’s inventory could soon “re-elevate the brand and help gross margins”.

Siegel remains bullish on Under Armour with an outperform rating and $25 price target, which is well above Friday’s closing price.

In New York, UA slumped into negative territory after the first bell and eventually finished down 11.37% at $15.36.

The latest fall means that Under Armour’s stock has now dipped around 30% during the last six months.

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