Forget Nike, This Athletic Apparel Stalwart Is Poised For Big Things

Under Armour, Inc. (NYSE: UAA), after losing more than 70% of its market value in the last five years on the back of lackluster financial performance, is finally beginning to show some signs of recovery. In the fourth quarter of Fiscal 2024 which ended on March 31, Under Armour’s sales in North America fell 10% YoY. Concerningly, the company projected a worsening of sales in Fiscal 2025 with North American sales likely to fall between 15% to 17%. The company has introduced a restructuring plan to turn things around, which includes laying off employees. Under Armour expects to incur $90 million in restructuring charges. Under Armour’s perceived inability to keep up with changing consumer preferences is at the core of its problems, and the company, led by Kevin Plank, is planning to change its fortunes by focusing on innovation to stay in sync with evolving athletic apparel trends.

A Look At The Competition

According to Euromonitor, Under Armour lost approximately 60 basis points of market share in the sportswear category in the all-important North American market in 2023 while close rival Lululemon Athletica (LULU) gained 160 basis points of market share. The company has consistently lost market share to athletic apparel giants such as Nike Inc. (NKE) as well. According to S&P Global, Nike has aggressively invested in maintaining and growing its brand equity since 2016 while Under Armour’s brand investments have been sluggish during the same period. Nike, which is expected to report quarterly earnings later today, has consistently recorded revenue growth in recent quarters and is expected to report YoY revenue growth of just under 1% for the fourth quarter of Fiscal 2024 when it reports earnings today.

To successfully turn things around, Under Armour is returning to its roots to focus on the performance apparel sector. During recent earnings calls, the company management also pointed to an acceleration in brand investments in the coming quarters, which should lead to an improvement in market share over the long term. In addition to these, Under Armour is planning to invest in improving its direct-to-consumer strategy to understand and cater to consumer preferences with improved agility.

What The Analysts Are Saying

Under Armour’s turnaround efforts are finally drawing the attention of some Wall Street analysts. Argus Research analyst Kristina Ruggeri, defending her bullish stance on the company yesterday, claimed that the recent pullback in Under Armour’s share price presents an attractive investment opportunity for investors. The analyst noted that the company’s new inventory management strategy, renewed focus on premium products, and the new rewards program will pave the way for revenue growth in the foreseeable future. Argus has a price target of $10 for UAA stock, which implies an upside potential of 45% from the current market price. Based on the ratings of 20 Wall Street analysts, the average Under Armour price target is $7.47, which suggests the company is perceived as undervalued by analysts.

Dilantha has no positions in the companies mentioned in this article. Stocks.News has positions in Nike.