UAA - Here's Why You Should Stay Away From Under Armour Stock
Investors in Under Armour (NYSE: UA) (NYSE: UAA) have had quite the roller coaster ride over the years. After going public in Nov. 2005, the stock skyrocketed 17-fold over the next decade, only to lose more than 80% of its value since then. The once high-flying athletic apparel company continues to face difficult challenges, all of which center around its diminishing brand presence.
As of Dec. 31, 2019, close to 90% of Under Armour's company-owned stores in North America consisted of outlet locations. The company relies on its network of these factory house stores to sell excess, discontinued, and out-of-season products, a strategy that has had a negative effect on its brand value. Furthermore, trouble at the company's wholesale partners has also been an issue. In 2018, Dick's Sporting Goods CEO Edward Stack blamed disappointing holiday sales primarily on Under Armour's expanded distribution and promotional strategy.
This has led to a falling of the brand's relevance with teenagers in the United States, a potentially very lucrative demographic as they can be lifelong customers. According to Piper Sandler's 39th semiannual "Taking Stock With Teens" survey (released on April 8th, 2020), Under Armour held the top spot in the "brands no longer worn" category for teenage upper-income males for the fourth consecutive time. Once this sentiment shifts in the wrong direction, it's extremely difficult to reverse course.