Cracks in Under Armour

An anonymous buyer from a major national sporting goods retailer in Farmhouse's report said the store has received "a lot of negative feedback" about the shoe not fitting right. Clearly, not every buyer reported problems. But when a company is introducing a new product that will go head to head with a category killer like Nike, it can't afford to stumble out of the box if it wants to make it to first base with consumers.

The company may be in a tough spot with the product line if it doesn't compete well with Nike. Under Armour is considered a premium brand, so it can't lower its pricing by too much if it wants to maintain that image. Additionally, margins are likely to be lower than rival Nike's, because of the volume that each company produces. Therefore, Under Armour may not be in the position to lower prices unless it sacrifices significant margin.

The fishing apparel seems to hold even less attraction to its targeted audience. According to Farmhouse's research, many buyers reported that Columbia Sportswear (COLM - Cramer's Take - Stockpickr) remains the preferred brand. According to a buyer from one of the nation's largest sporting goods retailers, "Apparently, fishermen don't care for the style of the UA fishing shirts."

On the competitive front, Nike is not going to sit back and hand over market share to Under Armour. The footwear and apparel giant just introduced a cotton moisture-wicking T-shirt and expects to bring out several cold-weather apparel lines to go head to head with Under Armour's cold-weather gear. "National buyers are excited about Nike's competitive products and are making room for them," Farmhouse's Jim Sanderson says. Farmhouse does not do any investment banking. Sanderson does not have positions in Under Armour or Nike.

Under Armour did not return calls seeking comment.

Can't Hit Them All

Now before you Under Armour bulls start firing off angry emails, let me say that I am not predicting the downfall of the stock due to fishing shirts and baseball cleats. There were plenty of positive anecdotes from buyers in the report.