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Under Armor inventory reduction leaves the brand in a stronger position

Shares of Under Armor Inc. rose 4.5% in Tuesday's trading after the sports equipment company reported gains and sales that exceeded expectations and inventory levels that fell 12%.

Under the armor

UA, + 4.49%

UAA, + 6.88%

He said that better inventory management helped him control prices and promotions.

"As we continue into 2019, we believe that our cleaner product assortments, product flows and inventory positions will create greater opportunities for clear differentiation and, therefore, better segmentation among our retail partners," said Patrik Frisk, director of Under Armor operations, in the earnings call. According to a transcript of FactSet.

Under Armor is undergoing a transformation program that, according to CEO Kevin Plank, is "focused on running a smarter, faster and stronger company."

That was partly because the year's revenues increased 4% to $ 5.2 billion.

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"From our calls to investors, it seems that many see the path of least resistance up and a significantly lower inventory will help previously high margin expectations," wrote Instinet analysts led by Simeon Siegel in a note after the publication of the results of the fourth quarter of Tuesday morning. "However, we are concerned that the burden of proof falls on the administration to influence its American, direct consumer and footwear trends."

Under Armor's Instinet fees are reduced with a target price of $ 14.

For the fourth quarter, revenues from North America fell 6% to $ 965 million. For the year, revenues in the region fell by 2% to $ 3.7 billion. Under Armor Finance Director David Bergman attributed the decline to "the contraction of our wholesale business, coupled with lower sales to our channel out of price."

This could generate concern with investors, according to UBS.

"[T]The market probably continues to question the strength of the Under Armor business in North America, "wrote analysts led by Jay Sole in a note issued before the earnings call." We think the market is probably wondering how the company will generate a improvement in the sales growth rate in North America. "

The UBS rates of Under Armor are neutral with a target price of $ 21.

Data from Celect, a cloud-based inventory management platform, found that US non-edible retailers. UU They lost $ 300 billion in revenue in 2018, largely due to "erroneous inventory judgments."

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"Moving on to our regional perspective, protecting our brand remains our key focus as we manage the market appropriately with the right level of discipline to drive balanced growth," said Frisk. "From North America that means we are at a stabilization point."

The company will use innovative products such as its HOVR running shoes and the franchise of NBA star Steph Curry to differentiate the brand, along with "strategic operation priorities," including a better understanding of the target customer through marketing efforts more accurate, said Frisk.

Under Armor shares have gained 33% in the last year, while the S & P 500 index

SPX, + 1.29%

It has risen by 3.1% in the period.

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