Under Armour Inc. (NYSE:UAA) is up for the year and has some backing on Wall Street, but Under Armour stock is not all the way back by any means.

The stock got a big boost in February when earnings came in ahead of expectations, and has held most of the gain, opening for trade April 10 at about $16.64 per share.

That was enough for analysts at Robert W. Baird & Co. Inc.  to start pounding the table for the stock, saying expectations for Under Armour stock are too low and that revenues could grow at low double digits this year.

But Sam Poser of Susquehanna Financial Group LLLP quickly doused the optimism, saying its international growth might just be excess inventory and that its U.S. operations are still a mess. 

The truth is that while the company has made some positive changes at the executive level, it has yet to address its chief problem.

Under Armour Stock and the Fashion World

Under Armour is selling activewear as sporting goods when it’s a fashion choice.

As analysts at Morgan Stanley (NYSE:MS) note, Under Armour gear sells at full price through sporting equipment retailers like Dicks Sporting Goods Inc (NYSE:DKS) and at a discount through Kohl’s Corporation  (NYSE:KSS) stores. Dick’s is the key market, and sales there are down 10%.

Shoppers seeking activewear are simply waiting for the inventory to build, the price to come down, and the sales to happen at Kohl’s.

The same thing is happening at Hibbett Sports, Inc. (NASDAQ:HIBB). Market share is falling among sports enthusiasts, and the perception is that Under Armour is best bought at a discount.

What Under Armour, and its competitors, seem not to realize is that shoppers don’t care which athlete is wearing an outfit so much as whether they feel fashionable wearing it.

Add the hack (caused by incompetent operations) that lost data on 150 million people at MyFitnessPal, the tech unit it has paid scant attention to since putting it together a few years ago, and you have a company in clear disarray.

Tale of the Tape and Under Armour Stock

The March quarter, due to be reported May 15, is going to tell the tale. Analysts are expecting a loss of 5 cents per share on revenue of $1.12 billion. Those expectations are modest, falling just short of last year’s March quarter.

Failure of Under Armour stock to meet such modest expectations will raise a red flag and could send the stock down into the single-digits. The bullish analysts are basing their call, in part, on the modest estimates. 

But even if the company meets the number, its return on equity is deteriorating, as are its margins, because it’s perceived as a leisure wear outfit that people can easily buy at a discount.

Change the Story

If Under Armour management understood how its retail strategy is killing the brand, and took a new direction, I could be bullish on it.

What Nike Inc. (NYSE:NKE) and, especially, Adidas AG (OTCMKTS:ADDYY) have recognized is that their clothes are streetwear, and that they need street credibility to sell it. Both have actively gone after rap artists (JayZ in the case of Nike, Kanye West, Pharrell Williams and now Drake in the case of Adidas) and are selling their clothes as fashion necessities.

Fashion is the future, not sports. Under Armour not only lacks a strategy in this area, it seems to not understand the problem. Kohl’s is not going to get it where it needs to go. Neither is Dick’s, for that matter.

Under Armour needs credibility among people who care about activewear if it is going to sell more of it.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.