Reuters/Jim Young
- Under Armour is getting slammed after poor guidance from its earnings report.
- The company will probably continue to struggle for a few quarters while it figures out its inventory issues.
- It's definitely not over though. With a new COO, the company may be able to turn around.
- Check out the real-time stock price for Under Armour.
Under Armour released its quarterly results on Tuesday, and lower guidance sent the shares plummeting by more than 20%.
The company "is not necessarily in control of its destiny," wrote Pamela Quintiliano, an analyst at SunTrust Robinson Humphrey, in a Wednesday note to clients.
"An inventory overhang in a challenging domestic wholesale market with strong negative external headwinds likely pushes back the turn by at least several quarters, while international as well as broader process changes do not meaningfully swing the operating pendulum until fiscal year 2019," Quintiliano said.
Inventories are going to be one of the biggest thorns in Under Armour's side in the near term. The company has had issues getting their products to wholesalers on time, and inventories swelled by 22% in the third quarter. Under Armour is trying to bring its operations up to speed under a new COO, according to Quintiliano. Once those issues are under control, the company will be able to focus on the bigger picture.
But, in the near term, the Under Armour is at the mercy of its already shipped inventory, which it will need to clear before it can get newer products on the shelves. Those inventory issues caused Quintiliano to slash her price target from $25 to $14. That's still 23% above the company's current price.
It's certainly not the end of the company, Quintiliano said, but its recovery will take several quarters to implement and probably leave Under Armour bulls hurting in the meantime.
"We think the changes Under Armour is making leaves them well positioned to excel in the long term though we see a turn several quarters out, at least," Quintiliano wrote.
Under Armour is down 55.55% this year.
