Under Armour Inc (UA) has been appearing bearish for quite some time now. In the past three months, the company has underperformed the Zacks categorized Textile-Apparel Manufacturing industry, which occupies space in the bottom 50% of the Zacks Classified industries.
UA’s shares have declined 20.3% in the said time frame compared with the Zacks categorized industry’s fall of 8.8%.
Further, this designer of athletic footwear, apparel and accessories carries a Zacks Rank #4 (Sell) with a VGM Score of “F”. In addition, its share price is currently hovering close to its 52-week low of $29.00.
We note that Under Armour has been grappling with higher interest expense due to increase in its debt level. Going forward, management expects interest expense to surge to approximately $30 million. This rise may weigh upon the company’s bottom line.
In third-quarter 2016, the company’s interest expenses increased to nearly $8.2 million in comparison with $4.1 million in the prior-year quarter. Also, higher debt level remains a major concern for the investors. In the aforesaid quarter, the company’s total debt increased to roughly $1.07 billion from about $902 million in the year-ago quarter.
In addition, Under Armour faces intense competition in the sporting goods industry from other big guns on several attributes such as style, price, quality, comfort and brand name.
Moreover, competitors like Nike Inc (NKE) and adidas AG (ADR) (ADDYY) have significant financial, technological, engineering, manufacturing, marketing and distribution advantages, which may further weigh on the company’s performance.
Also, macroeconomic challenges and foreign currency headwinds may dent the company’s operational performance.
However, there still remains a ray of hope to overcome these challenges on the back of brand development, expansion of its DTC business, product innovation and foray into the technology-based fitness business. Evidently, Under Armour is making efforts to increase its global footprint and market share.
Additionally, estimates have been largely stable ahead of the company’s fourth-quarter earnings release.
A better-ranked stock in the same industry is Perry Ellis International, Inc. PERY, which has surged 34% in the past one year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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