Why Investors Shouldn't Freak Out Over Under Armour's Rare Earnings Miss

Under Armour offers several positives for investors to digest even as it misses Wall Street profit estimates.
By Brian Sozzi ,

The market shouldn't be too concerned about a rare earnings miss from red-hot Under Armour (UA) - Get Report

Shares of the athleticwear maker fell as much as 4% in premarket trading on Tuesday as earnings, adjusted for one-time items, came in at 1 cent a share, narrowly missing Wall Street forecasts for 3 cents. Under Armour said it was hurt by 3 cents a share from liquidation sales at the now defunct Sports Authority. Net sales rose 28% from the prior year to $1 billion, matching analysts' estimates.

But the report may not be as bad as the market's initial downbeat reaction suggested.

Under Armour continued to see strong sales gains in apparel, footwear and accessories despite a sluggish backdrop for consumer spending during the second-quarter. Sales growth was led by a 58% year-over-year increase for footwear, which continued to be fueled by solid interest in NBA star and Under Armour spokesman Stephen Curry's basketball sneakers. Under Armour also said its running sneaker category performed well, too. Meanwhile, inventory growth cooled to a 30% increase compared a 44% surge in the first quarter -- the improvement will likely ease Wall Street's concerns that Under Armour still has too much inventory sitting on the floors of key partners such as Macy's (M) - Get Report and Dick's Sporting Goods (DKS) - Get Report , and that profit growth will accelerate later this year.

Further, Under Armour reiterated its full-year sales and operating profit outlooks. The company still expects full-year sales of $4.925 billion, representing a 24% increase from the prior year. Operating income continues to be planned in a range of $440 million to $445 million, or roughly 8% to 9% growth year over year. 

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