Yahoo Finance Why Under Armour Stock Dropped 24% in October
What happened
Under Armour (NYSE: UA) (NYSE: UAA) stock lost 24% last month, according to data provided by S&P Global Market Intelligence, even as the broader market rose by 2%.
The slump sent shares to new multiyear lows, down nearly 60% since just the start of 2017.
So what
Even though they had been bracing for bad earnings news from the sports apparel specialist, investors cringed at its third-quarter report released late in the month. In that announcement, Under Armour posted a surprising sales decline as revenue fell 12% in its core U.S. market. Profit margin fell, too, thanks to price cuts amid weakening demand.
Image source: Getty Images.
Now what
CEO Kevin Plank and his executive team highlighted booming results out of their international business. However, unlike Nike, which gets most of its sales from outside of the U.S., Under Armour still counts on its home market to deliver about 80% of sales.
Thus, with the industry in contraction and competition rising, the retailer lowered its revenue and profit forecasts for the second straight time this year. While starting 2017 predicting steady profitability and low double-digit growth, Under Armour now expects sales to rise in the low single-digit percentage range even as gross margin contracts.
That forecast confirms management hasn't yet found a path back toward an operating rebound heading into the biggest sales period of the year.
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Demitrios Kalogeropoulos owns shares of Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.
