Under Armour (UAA) earnings Q3 2019 beat, but stock sinks

Earnings


Under Armour‘s quarterly earnings and sales topped analysts’ estimates, but the company on Monday morning trimmed its revenue outlook for the full year, citing “traffic challenges.”

The retailer’s shares were plunging more than 12% in premarket trading, after news broke Sunday evening that federal agencies are investigating whether the company used bad accounting practices to make its finances look healthier.

Under Armour confirmed it has been cooperating with the U.S. Securities and Exchange Commission and the U.S. Department of Justice investigations.

A spokesperson for the company told CNBC in an email: “The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company firmly believes that its accounting practices and disclosures were appropriate.”

Here’s what Under Armour reported for its third quarter ended Sept. 30 compared to what analysts were expecting, based on Refinitiv estimates:

*Earnings per share: 23 cents vs. 18 cents expected
*Revenue: $1.43 billion vs. $1.41 billion expected

Under Armour said it now expects revenue to be up roughly 2% in fiscal 2019, compared to a prior range of up 3% to 4%. Analysts had been calling for annual revenue growth of 3.1%.

Net income during the third quarter grew to $102.3 million, or 23 cents per share, compared to $75.3 million, or 17 cents a share, a year ago. That beat Street expectations of 18 cents, based on Refinitiv data.

Net revenue dropped about 1% to $1.43 billion from $1.44 billion a year ago. That beat expected sales of $1.41 billion.

Sales in North America, a trouble spot for the company, were down about 4%, totaling $1.01 billion.

The athletic apparel and sneaker maker has been struggling to grow sales on its home turf, in a crowded market with Nike, Adidas, Lululemon, and others. Ahead of Monday’s earnings report, it was still calling for sales to decline slightly in North America in 2019. Last quarter, North American sales dropped 3%.

Under Armour said apparel sales overall dropped 1% during the third quarter, while footwear revenues plunged 12%, and accessories sales fell 2%.

Word of the federal probe comes after CEO Kevin Plank, in a surprise move, announced he will step aside from the chief executive role on Jan. 1, to be succeeded by COO Patrik Frisk. Plank is expected to transition to executive chairman and brand chief.

Under Armour shares as of Friday’s market close are up about 19.6%. The stock, which once hovered around $50, closed Friday at $21.14. The company is valued at roughly $9.5 billion. Nike shares are up about 20% this year, while Lululemon shares have surged 65%.



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