FILE PHOTO: The ticker symbol and company logo for Under Armour, Inc. is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 22, 2019. REUTERS/Brendan McDermid
November 4, 2019
(Reuters) – Under Armour Inc <UA.N> <UAA.N> on Monday cut its forecast for annual revenue for a second straight time, adding to its troubles after the sportswear maker disclosed a federal probe related to its accounting practices.
Shares of the company were down about 13%, a day after the Wall Street Journal reported the company was being investigated for shifting sales from quarter to quarter to appear financially healthier.
The company, 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 Inc <NKE.N>, Lululemon Athletica <LULU.O> and Adidas <ADSGn.DE>.
To keep up, the company last year adopted a strategy that has worked well for rival Nike <NKE.N> 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% in fiscal 2019 compared with the prior forecast of a 3% to 4% rise.
However, fewer sales at discounted prices boosted margins by 220 basis points and its quarterly profit beat market expectations.
The company also forecast annual profit to be at he higher end of its prior range of about 33 cents to 34 cents per share.
Net income rose to $102.3 million, or 23 cents per share in the third quarter ended Sept.30, beating estimates of 18 cents, according to IBES data from Refinitiv.
Net revenue fell about 1% to $1.43 billion, but was above analyst expectation of $1.41 billion.
(Reporting by Nivedita Balu in Bengaluru; Editing by Arun Koyyur)
