Please ensure Javascript is enabled for purposes of website accessibility

Why Under Armour Stock Is Tumbling Again Today

By Rich Duprey – Updated May 13, 2020 at 11:47AM

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

The athletic apparel maker's earnings report continues to weigh on its shares.

What happened

Shares of athletic apparel maker Under Armour (UA -2.54%) (UAA -2.41%) were down 6% in midday trading Wednesday, continuing their slide after a disappointing earnings report Monday.

So what

Under Armour was struggling before the coronavirus pandemic struck, but the forced closure of retail stores hit it hard. Unlike many other businesses, it wasn't able to effectively pivot to a direct-to-consumer (DTC) model, causing sales to tank further than they otherwise might.

Basketball player dunking a ball

Image source: Getty Images.

Now what

There doesn't seem to be much hope of a quick turnaround for Under Armour, even if retailers are allowed to reopen, as is occurring in a number of states.

CEO Patrik Frisk told analysts on the earnings conference call that since mid-March, when COVID-19 was declared a pandemic, "about 80% of our global business has been at a standstill."

While that's not a surprise for its physical retail presence, what is surprising is Under Armour's inability to capitalize on its e-commerce channel, which it once described as one of its "largest long-term growth opportunities." DTC revenue tumbled 14% in the first quarter.

It also risks damaging its reputation with athletes. CFO Dave Bergman said Under Armour was renegotiating its contracts with them and in a number of cases, "we've been able to get some extended payment terms."

The company is looking toward the back half of 2020, and maybe into 2021, before it sees business normalizing. Investors aren't waiting around that long, and its stock is down almost 12% this week.

Rich Duprey 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.

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

Under Armour, Inc. Stock Quote
Under Armour, Inc.
UAA
$7.30 (-2.41%) $0.18
Under Armour, Inc. Stock Quote
Under Armour, Inc.
UA
$6.52 (-2.54%) $0.17

*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
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

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.