The Ratings Game: Under Armour shares sink after JPMorgan forecasts a ‘full-price hangover’ that will drag down revenue

This post was originally published on this site

Under Armour Inc. stock took a 6.6% tumble after bearish JPMorgan analysts lowered their revenue estimates for fiscal 2020 on continued struggles in North America.

“[B]ased on our recent work we see the cadence of North America revenue second-half weighted with sequential improvement in wholesale and new full-price store openings not sufficient to fill the hold from the continued reduction in off-price shipments activity… and potential ‘full-price hangover’ effect post off-price availability,” analysts said.

Under Armour UA, -4.70% UAA, -6.41%  reported a sales decline in the most recent quarter, which sent shares plummeting.

See: Dick’s Sporting Goods benefits from adding more Adidas Yeezy sneakers while eliminating gun sales

JPMorgan is forecasting 3.8% revenue growth in fiscal 2020 while FactSet forecasts a 4.8% increase to $5.55 billion. The FactSet outlook for fourth-quarter revenue is $5.30 billion.

JPMorgan rates Under Armour neutral with a $23 price target. JPMorgan previously had Under Armour at not rated.

Under Armour stock has gained 12.6% over the past year.

JPMorgan upgraded Nordstrom Inc. JWN, +2.76%   to neutral from underweight and lifted its price target to $41 from $26, noting changes in the full-price strategy, including the addition of a “mini-boutique” of limited-edition Nike Inc. NKE, -0.10%   sneakers in seven full-line stores, a list of emerging digital brands that “drive millennial engagement,” and other efforts.

“We see Nordstrom’s recent sales slump as idiosyncratic with the company implementing fixes that should show benefits over the next few quarters,” analysts said.

Also: Nike’s Jordan brand just had its first billion-dollar quarter

Nordstrom stock is up 2.5% in Monday trading, but down 12% for the last year.

JPMorgan also raised a few price targets across the retail space, including Macy’s Inc. M, +3.45%   (to $15 from $13), Lululemon Athletica Inc. LULU, +1.20%   (to $255 from $231), Boot Barn Holdings Inc. BOOT, +3.95%   (to $52 from $49) and Urban Outfitters Inc. URBN, +2.65%   (to $27 from $25).

Analysts call Boot Barn the top name in a “highly fragmented” western/work wear market that is worth $20 billion and is experiencing improving trends in 35% of its store base, comprising oil-and-gas and Texas markets.

“With about 90% of sales at full-price, 30% of assortment work wear, and its western offering differentiated given its niche positioning (and destination nature of its store base), Boot Barn targets steady merchandise margin improvement over time combined with low fixed-cost hurdles to drive EBIT margin expansion toward 10%+ over time,” analysts said.

The SPDR S&P Retail ETF XRT, +0.38%   has gained 7.5% in the past year while the S&P 500 index SPX, +0.35%   is up 28% and the Dow Jones Industrial Average DJIA, +0.24%   has gained 22.2%.

Add Comment