Under Armour sinks 15 percent on slashed revenue forecast
By
Reuters
Published
Nov. 4, 2019, 10:32 a.m. ET
Shares of Under Armour plummeted more than 15 percent Monday after the sportswear maker cut its forecast for annual revenue for a second straight time, adding to its troubles after it disclosed a federal probe related to its accounting practices.
Shares of the company sank a day after the Wall Street Journal reported the company was being investigated for shifting sales from quarter to quarter to appear financially healthier.
Under Armour, however, defended its accounting practices and disclosures, and said it has been cooperating with the investigators since 2017.
Under Armour’s forecast cut comes at a time when it has been struggling to grow in the United States where it faces competition from Nike, Lululemon Athletica and Adidas.
To keep up, the company last year adopted a strategy that has worked well for rival Nike and includes selling apparel and footwear directly to customers online or through its own retail stores.
However, the shift is yet to yield results for the company as most of its customers are used to buying merchandise in department and retail stores at a discounted price.
“You expect that sometimes a company’s growth will start leveling out… but if they are trying to postpone the inevitable by messing with their accounting practices… That’s bad,” said Paula Rosenblum, a retail analyst with RSR Research.
The company’s said lower-than-planned merchandise at discount stores and a challenging retail environment would weigh on its 2019 revenue.
The sportswear maker said it now expects revenue to grow about 2 percent in fiscal 2019 compared with the prior forecast of a 3 percent to 4 percent rise.
The company also forecast annual profit to be at the higher end of its prior range of about 33 cents to 34 cents per share.