The story of athletic gear upstart Under Armour (NYSE:UAA) (NYSE:UA) has been something of a roller coaster: Its years of rapid rises were followed more recently by a steep and painful descent as slowing sales and management missteps stripped it of its stock market darling status. So those investors who have been holding on for the ride were no doubt relieved to see that it outperformed last quarter, a result that sent shares soaring.
In this segment of the Motley Fool Money podcast, host Chris Hill and senior analysts Ron Gross, Matt Argersinger, and Jason Moser dig into the numbers, its corporate strategy, and some of the inside-baseball indicators that suggest a real turnaround is in the offing.
A full transcript follows the video.
This video was recorded on Nov. 2, 2018.
Chris Hill: Under Armour's third quarter profits came in higher than expected, sending shares up 25% this week, Jason. When was the last time we said anything approaching that with Under Armour?
Jason Moser: Little by little, it seems like maybe this turnaround starting to take hold. When you look at the quarter, on the whole, there wasn't one thing that really stood out. But it's just progress on all fronts, really. The International business is still strong. U.S. is treading water. I know treading water is not what we really want to hear, we want to hear more about growth. But it's worth noting that they cut back a lot on promotional stuff for the quarter. That affected the U.S. business, affected the direct-to-consumer business, as well. But inventory management is improving by leaps and bounds.
Most importantly, and one of the hurdles we've helped them to here, is that the COO and CFO are still there. Plank hasn't scared them away yet. That's a big plus. And, listen, you've got The Rock pushing your stuff still, that's a win in any capacity. All in all, it's not like they're there yet, but we are seeing signs that this turnaround is starting to take hold. Under Armour is still a very powerful brand. It sounds like they've come to the realization that they need to maintain that premium status in the market as performance gear, instead of trying to go performance and fashion and wherever else they may go. I think that's good. The market opportunity is a little bit smaller, but it's a big market opportunity still, and they have a reputation in the space for high performance gear anyway. All in all, as a shareholder, I'm happy.
Hill: Yeah, all kidding aside, Matt, at the beginning of this year, that's one of the things we talked about. Kevin Plank, for all the things he has done right at that company, has struggled, historically, keeping an executive team around him. And we said, "Let's see if he can get through the entire year with the C suite still in place."
Argersinger: I know. It's funny to joke about that, but it's true. Under Armour is an example of a founder-led business, and we love investing in these kinds of companies at The Fool. Under Armour has been a wonderful company to follow and invest in. But it really got to a point where Kevin Plank had to realize that there were decisions he was making that he needed more council, he needed more advice on. I'm really thrilled to see the CFO and COO staying on. It's really key.
Chris Hill owns shares of Under Armour (A Shares) and Under Armour (C Shares). Jason Moser owns shares of Under Armour (A Shares) and Under Armour (C Shares). Matthew Argersinger owns shares of Under Armour (C Shares). Ron Gross has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool has a disclosure policy.