UAA - Telsey downgrades Under Armour after Nike Adidas inventory warnings

Under Armour ( NYSE: UAA ) shares marked a modest decline on Friday after Telsey Advisory took their rating on the stock to a Hold-equivalent.

The firm noted that warnings on international sales and inventory issues have aroused more caution on footwear and apparel retail trends. In particular, both Adidas ( OTCQX:ADDYY ) and Nike ( NKE ) noted as of late that high inventory has prompted a need for promotions that is likely to cut into margins. While Under Armour’s ( UAA ) inventory has been cited as “leaner than most competitors”, it too is expected to utilize promotions to compete, especially in a tougher macroeconomic environment.

“It is likely Under Armour cuts its 2022 outlook again when it reports 2QF23 earnings on November 3,” the firm’s analysts said. “Given the pressures being faced by the sporting goods brands and Under Armour’s positioning in the marketplace  with slower sales growth and more apparel exposure we are downgrading our rating to Market Perform from Outperform.”

Telsey’s analysis noted that the potential for a new CEO appointment could jolt shares to the upside, it would still likely fail to completely offset the worsening retail industry backdrop. As such, the stock was downgraded to Neutral from Buy and the 12-month price target on shares was reduced to $8 from $12.

Read more on Nike’s latest warning on margins .

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