Eric Bleeker: Let's move on and just look at some reasons that investors might want to be scared of Under Armour. Great brand, but -- why might you want to temper back expectations?
Austin Smith: Look. It's staring you right in the face: 50 times earnings, and this is an uphill battle. I personally don't like paying 50 times earnings for a company, especially one whose biggest growth drivers are going to increasingly butt up against Nike.
Although I imagine Under Armour has always been a thorn in Nike's side, going after footwear? That's Nike's home turf. Nike dominates the space, and as high-growth and as impressive as Under Armour has been, things are going to start getting more difficult if you're going into Nike's playground, which is footwear.
You've got a 50 times multiple, and it's an uphill battle with their new growth drivers that they're counting on. Frankly, look. There's nothing proprietary here. There's no patents, there's no special technology. It's performance wear that has a very strong brand, but it's a young brand.
The apparel space, there's always young brands. It's the rare company that's able to sustain a brand over the long run. Companies like Coach and Nike are the unbelievable anomaly in this space right now. (UNKNOWN:KSWS.DL)
Under Armour, although it has a strong brand today, there's no saying what it will be tomorrow. The investing graveyard is littered with the K-Swisses of the world, companies that were flashes in the pan, in terms of their popularity.
Another reason to sell them is that Under Armour, more than other companies in this space like, say, [lululemon athletica], are more reliant on their retailers.
They sort of split the difference between retail and direct-to-consumer sales, but that means a big portion of your sales is going to come from companies like Dick's Sporting Goods, Hibbett, and Cabela's, and those companies can hurt for reasons that are way outside of Under Armour's control.
If you look at some of the outdoor retailers that sold, for instance, firearms recently -- with the whole Sandy Hook tragedy, a lot of these retailers saw a huge dropoff in their foot traffic, which is going to hurt a company like Under Armour that sells a lot of products in their store, even though it's not directly related.
There are a lot of things that are outside of your control when you're tied to these retailers. Let's be honest: The department-store experience that Under Armour is tied to, with Macy's and Dillard's, is not exactly a growing space right now. It's a dying segment, and that's something Under Armour is going to have to offset.
Austin Smith and Eric Bleeker have no position in any stocks mentioned. The Motley Fool recommends lululemon athletica, Nike, and Under Armour and owns shares of Dick's Sporting Goods, Dillard's, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.