Under Armour, Inc. (UAA) Sales/Inventory Disconnect Increases, BTIG Reiterates Sell
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BTIG analyst Camilo Lyon reiterated a Sell rating and $5.00 price target on Under Armour, Inc. (NYSE: UAA) after the company reported less bad Q2 results but did not offer a plan that would enable the brand to return to normalized growth.
The analyst stated "we reiterate our SELL rating as the challenges it faces have only been compounded by COVID-19. Given the company's bloated inventory position (inventory +24% vs. sales -41%), 2H20 gross margins are expected to be down meaningfully as promotions and off-price
selling ensue. We note that the strong gross margin performance in Q2 (+283bps) was temporary as higher margin e-commerce sales were disproportionately stronger and no off-price orders were shipped. Consequently, those dynamics reverse in the back half of the year as the company is now forced to return to the unhealthy cycle of using the off-price channel to move excess product, thus compressing 2H20 gross margins, only to face tougher "inflated sales" comparisons in 2H21 that will further challenge its growth outlook".
Shares of Under Armour, Inc. closed at $10.60 yesterday.
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