Two weeks ago, Under Armour
Shares have dropped more than 6% in response to Under Armour's confirmation that it grew full-year sales by 20%, but shrank full-year profits 27% (to $0.77 per share). And I'm just guessing here, but I suspect investors especially didn't like the news that fourth-quarter sales grew an anemic 2.5% while profits shrank by half.
Don't say you weren't warned
I certainly understand the displeasure (and for reasons explained in a previous story, I think this feeling will emerge again when UA retailers like Cabela's
Sure, Under Armour's now pulling down profit margins inferior to those of more pedestrian rivals like Deckers Outdoor
Inventories
Sears Holdings
Cost control
With inventories now in hand, costs appear likely to become the new "issue" for Under Armour. Selling, general, and administrative (SG&A) expenses for the year grew 27% in comparison with fiscal 2007 -- faster than overall sales growth. Similarly, in the fourth quarter, SG&A spending was up 9%, again outpacing sales.
Foolish takeaway
This, then, is what the company must accomplish in fiscal 2009: Get operating costs under control. Eroding gross margins probably can't be helped; they're lower in footwear than in clothing, and that's just a fact of life. But SG&A spending is something management can get a handle on. It must, if it's ever going to get back to growing the bottom line for shareholders.
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