Sports apparel company Under Armour (NYSE:UAA) is underwater today as supply-chain concerns clearly spooked investors. Despite beating expectations on today’s earnings call, UAA stock is down 12% heading into the afternoon. Supply chain concerns have plagued a number of companies across numerous sectors over the past several years. It seems Under Armour is the latest casualty of the supply pinch.
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What has Under Armour investors spooked today?
Well, today Under Armour announced its fiscal fourth-quarter earnings, which, all things considered, were quite strong. UA recorded revenue of $1.53 billion for the quarter ending Dec. 31, beating expectations of $1.47 billion, reflecting an 8% increase from the same period last year. This includes a 15% North America revenue increase and a 3% international gain. Additionally, Under Armour reported earnings per share (EPS) of 14 cents, handily beating its expected EPS of 6 cents.
Under Armour President and Chief Executive Patrik Frisk was clearly pleased with the company’s performance. He commented:
“The final quarter of 2021 demonstrated the power and consistency of Under Armour’s strategic playbook, which allowed us to capitalize on improving brand strength and consumer demand. By staying hyper-focused on operational excellence and serving the needs of athletes, we were able to deliver record revenue and earnings results for the full year.”
Unfortunately, Under Armour had more to report in its earnings report, much of which discouraged investors.
UAA Stock Falls Amid Reports of Growing Supply-Chain Constrains
Among its performance announcements, Under Armour shared its outlook for the quarter ending March 31, 2022.
While the sports brand expects revenue to increase at a mid-single-digit rate, this takes into account approximately 10 percentage points of headwinds due to increasing freight expenses attributed to Covid-19-related supply constraints. Indeed, Under Armor reported reductions in its spring-summer order catalog because of the pandemic supply pinch.
Additionally, Under Armour expects its gross margin to fall 200 basis points compared to last year, which includes a drop of 240 basis points from increasing freight expenses and the aforementioned supply issues. The company also mentioned challenges stemming from an expectedly unfavorable sales mix.
Investors clearly woke up on the bearish side of the bed today. Despite Under Armour’s bright sides, UAA is down substantially heading into market close. Under Armour stock has generally traded around the $20 price point, albeit with a fair amount of fluctuation. Today’s drop places UAA at $17.25 at the time of writing, a 52-week low.
Supply chain hiccups continue to eat away at a number of industries. Whether Under Armour can regain positive investor sentiment is clearly something only time will tell.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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