Please ensure Javascript is enabled for purposes of website accessibility

Why These 4 Sportswear Retailer Stocks Are Falling Today

By Jason Hall – Apr 1, 2020 at 2:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Stocks have turned down hard and fast today as the depth of the economic downturn becomes more apparent.

What happened?

Shares of sportswear maker and retailer stocks are falling sharply in afternoon trading on April 1, as the economic impact of the coronavirus pandemic are becoming more apparent. At this writing, shares of these companies, which make and sell athletic footwear and apparel, are running downhill hard and fast: 

Stock Price change on 4/1/20
Under Armour Inc Class C (UA 1.52%) (10.5%)
Under Armour Inc Class A (UAA 1.08%) (12.4%)
Foot Locker, Inc. (FL 0.19%) (8.3%)
Nike Inc (NKE 2.77%) (4.5%)
Skechers USA Inc (SKX 2.49%) (7.9%)

As of 1:21 PM EDT. Data source: Yahoo! Finance. 

So what

Over the past week, the federal government has taken massive actions to help soften the blow to the economy, with our elected officials and the Federal Reserve enacting a massive $6 trillion in financial support for individuals and businesses. Starting on March 23, stocks rallied hard and quick, gaining almost 20% by March 30 on hopes that government action would stave off the worst of the coming recession

Runner falling down.

Image source: Getty Images.

Today we are starting to see economic data showing that, indeed, the coming recession is likely already here. Several important surveys of manufacturing, payroll, and orders placed by businesses have started coming in, reporting on what businesses say they did in March. And it's not good.

The Institute for Supply Management manufacturing index fell to 49.1 in March, with any measure below 50 indicating that manufacturing is contracting. A survey by IHS Markit supported the findings of the IHS index. The IHS Market survey found that manufacturing output fell from February to March, with production and new orders shrinking at the fastest pace since the global financial crisis. The report also said prices are falling at the fastest rates in years as companies fight over every dollar they can get. 

As a result, manufacturers are slashing their workforces at the fastest rate in more than a decade, and the outlook is for even more cutting and contraction to come in April. 

Now what

Manufacturers and retailers that focus on discretionary goods like footwear and apparel are likely to be some of the worst affected by an economic downturn. Not only are they things consumers can do without or delay replacing, but many states and local governments have already ordered the closure of all non-essential retail stores.

All four of the companies above have shuttered their North American locations, and closed various numbers of stores in other parts of the world. Today's scary economic news indicates that, as more and more Americans hit the unemployment line, the worst could be yet to come.  

But that's not the same as saying these four companies are doomed. To the contrary, as much as they could suffer in the short-term, particularly in the U.S. where COVID-19 cases are skyrocketing and much of the economy will be essentially turned off for many weeks to come, all four have strong balance sheets, with substantial cash and minimal near-term debt. 

UA Cash and Short Term Investments (Quarterly) Chart

UA Cash and Short Term Investments (Quarterly) data by YCharts

They also all feature strong global businesses, and as other countries work past COVID-19, international sales should generate enough cash flows to help keep things going. And when you look out a year or two or five, today's prices will almost certainly look like fantastic bargains. 

Jason Hall owns shares of Foot Locker, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Skechers, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nike Stock Quote
$91.10 (2.77%) $2.46
Under Armour (A Shares) Stock Quote
Under Armour (A Shares)
$7.48 (1.08%) $0.08
Skechers Stock Quote
$34.94 (2.49%) $0.85
Foot Locker Stock Quote
Foot Locker
$32.33 (0.19%) $0.06
Under Armour (C Shares) Stock Quote
Under Armour (C Shares)
$6.69 (1.52%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.