More Squawk From Jim Cramer: 'Worrisome Departures,' Inventory at Under Armour (UA)

Under Armour (UA) stock is tumbling this afternoon as investors worry about high-level resignations and a potential inventory problem, but Jim Cramer still likes the stock long term.

Author:: Rachel Graf
Publish date:: May 4, 2016 12:14 PM EDT

NEW YORK (TheStreet) -- Under Armour (UA) - Get Report stock is down 6.27% to $40.05 in early-afternoon trading on Wednesday, as the upcoming departure of the sportswear retailer's Chief Marketing Officer Henry Stafford and Chief Digital Officer Robin Thurston has prompted a ratings downgrade at Brean Capital.

Brean Capital cut the stock to "hold" from "buy" on bad execution risk and possible promotions if rival Sports Authority, which filed for bankruptcy, liquidates its inventory.

Companies that sell gear from Sports Authority essentially took merchandise in but for the most part didn't receive payment because the company closed, TheStreet's Jim Cramer said on CNBC's "Squawk on the Street" this morning.

He recently spoke with Columbia Sportswear (COLM) CEO Timothy Boyle on CNBC's "Mad Money," and he admitted that the company got hurt by the liquidation.

To better illustrate the problem, Cramer mentioned that when he was in fourth grade, his father attempted to ship 10,000 bags to Moana Clothing, but the company had locked its doors.

He consequently packed his lunch in a Moana bag every day from the fourth grade to 12th grade.

"That's kind of where we are," he said of the Under Armour selloff. "That's what people are concerned about, plus the high-level resignations."

But Cramer believes that CEO Kevin Plank will be able to explain the situation and assuage investors' concerns.

He added in the above video that he really likes Under Armour long term. Still, Cramer is concerned that there's a bankruptcy where some of the company's goods were and the high-level departures are "worrisome."

"And you don't see worrisome departures from Nike (NKE)," Cramer mentioned.

(Under Armour is held in the Growth Seeker portfolio. See all of the holdings with a free trial.)

Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B.

Under Armour's strengths such as its robust revenue growth, growth in earnings per share, compelling growth in net income, good cash flow from operations and solid stock price performance outweigh the fact that the company has had somewhat disappointing return on equity.

You can view the full analysis from the report here: UA

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.