Analyst Predicts 30% Decline for Under Armour, “No Fundamental Recovery in Sight”


Susquehanna Financial Group Analyst Sam Poser has urged investors to sell Under Armour (UAA), predicting the share price will drop 30% in 2018; gains the company realized over the last 2 months. Poser believes the company’s decision to advertise with low-end retailers (i.e. KSS, DSW) is having an adverse effect on its efforts to sell product to “better retailers” (i.e. DKS, HIBB); insisting “there is no fundamental recovery in sight.” Stifel Analyst Jim Duffy has a contrary opinion, he’s pleased with the company’s recent cost savings initiatives and improved performance and foresees growth opportunities both internationally and within their footwear division.

Howie Long-Short: Following release of Poser’s note on Monday morning, shares declined 5.5%; closing at $15.11, the lowest the stock has been priced at since Summer ’13. Need a reason to believe UAA can turn it around? In June ’17, the company hired Patrik Frisk (former ALDO Group CEO) as President and COO. The 30-year industry veteran is considered an expert in preparing companies for a sale.

Fan Marino: Sloane Stephens, Under Armour’s long-time top female tennis endorser, has parted ways with the company and signed with Nike (NKE). Stephens, who signed with the brand as a teenager in 2010, won the 2017 U.S. Open wearing UAA tennis apparel. Financial terms of the deal were not disclosed.

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Amazon Takes on The Sports World; 25 Companies That Will Be Affected

Amazon has been credited with killing everything from book stores to electronics retailers since its 1994 launch. Now, with a market cap +/- $570 billion and $16 billion in annual operating cash flow, the company is taking aim at the sports world. In our final newsletter of 2017, we look at 4 of AMZN’s recent initiatives and the 25 companies most likely to be affected in 2018.

Amazon Expands Brand Registry Program, Now Includes Nike

In June, Nike (NKE) agreed to join Amazon’s brand registry program; seeking to curb counterfeiting and non-licensed selling within the e-commerce marketplace. The partnership also supports the athletic apparel and sneaker brand’s initiative to boost revenue through a shift to digital and DTC sales, relying less on struggling retailers. Competitors Adidas (ADDYY) and Under Armour (UAA) already have direct-sales deals in place with AMZN.

Names to Watch: FINL, DKS, FL, HIBB, BGFV; LON: SPD, LON: JD

Howie Long-Short: Athletic apparel and sneaker retailers count on NKE (70% of FL business comes from NKE); but NKE launched its “Consumer Direct Offense” strategy in fiscal Q1 ’18, increasing e-commerce business 19% YOY. Mediocre retailers beware, the company is maintaining just a few dozen wholesale relationships as it looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years).

Amazon Entering Private-Label Sportswear Business

In October, Amazon (AMZN) announced it was entering the private-label sportswear business and working with the same Taiwanese suppliers, Makalot Industrial Co. (TPE: 1477) and Eclat Textile Co. (TPE: 1476), that some of the world’s biggest athletic brands use. Elcat’s involvement is particularly noteworthy as the company manufactures high-performance sportswear for Nike (NKE), Lululemon Athletica (LULU) and Under Armour (UAA).

Names to Watch: NKE, UAA, ADDYY, LULU; TPE: 1476, TPE: 1477

Howie Long-ShortAMZN wants to be in the private-label clothing business because it pushes retailers to sell inventory on the e-commerce site. Should a retailer choose not to, AMZN will simply produce the item themselves and compete directly against the brand.

The Pursuit of Exclusive Broadcast Rights

In September, the company hired Brian Potter to lead its sports video business. In November, Jim DeLorenzo, head of sports, Amazon Video, said the company was pleased with viewership numbers, engagement and the reliability/quality of the cloud-based streaming service during its season long experiment streaming Thursday Night Football (10 games, $50 million); though it is too early to say if the company will pursue future exclusive sports broadcasting rights. The company has since done deals that will deliver Prime subscribers 37 ATP tour events (previously owned by SKYAY), the AVP Beach Volleyball tour each of the next 3 summers and docu-series on Michigan Football.


Howie Long-Short: NFL Senior VP, Digital Media, Vishal Shah recently said “we continue to think some of the best days are ahead [for traditional TV partners] despite some shifts in the media landscape.” That doesn’t sound like linear television will be excluded in the next round of negotiations, but the NFL is encouraging interested media companies to bid on both television and streaming rights for the leagues TNF package; leaving the door ajar for the tech giants to receive exclusivity for the first time.

Twitch: The Future of Game Broadcasts?

Twitch, the live-streaming platform most often associated with video games, has agreed to stream up to 6 live G-League (Gatorade sponsored NBA minor league) games. Broadcasts will include interactive overlays (viewers can click a team name/logo for player, team, game and season stats), a loyalty program to reward viewer engagement during broadcasts (i.e. custom emotes for group chat) and the ability for users to provide their own live commentary (over the game feed) via the Twitch co-streaming feature.


Fan Marino: NBA Commissioner Adam Silver has gone on record stating he’d like to see changes in the way sports broadcasts are presented; pointing out the lack of live stats and chatter surrounding the broadcast, that gamers have become accustomed to. I’m not ready to give up Mike Breen, Marv Albert and Ian Eagle for Towelliee; but it’s worth watching to see if anyone else is.

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California Treasurer John Chiang has urged state pension fund managers to divest holdings in companies that sell firearms and ammunition within other states, that are considered illegal in California. While this would be the first-time California, which has the nation’s largest state pension fund, has urged fund managers to excise connections to gun retailers in the state pension system; following the Sandy Hook massacre in 2012, state pension funds were asked to divest shares in gun manufacturers. Last year the New York City Employees’ Retirement system voted to divest shares of Dick’s Sporting Goods (DKS), Cabela’s (now private) and Big 5 Sporting Goods (BGFV).

Howie Long-Short: The California State Teachers’ Retirement System and the California Public Employee’s Retirement System own a combined $12.4 million worth of shares in DKS and an additional $1.7 million worth in BGFV. If this proposal were to pass, and in California that isn’t difficult to envision, public pressure could force other states to follow. I’m not ready to say a gun wholesale/retail sell-off is coming, but Chiang has sparked a movement that certainly could lead to one.

Fan Marino: Chiang sadly reported that 3 of the 59 killed in Las Vegas were California teachers.

California Treasurer Urges State Pension Funds to Drop Gun Sellers


Dick’s Sporting Good, Inc. (DKS) announced it would be opening 10 stores, including 8 flagship stores and 2 Field & Stream outlets by mid-September, as part of the company’s plan to open 43 new stores by the end of the year. The company reported Q2 2017 revenue growth of 9.6% (to $2.157 billion), attributing it to the expansion of its store network (13 stores in Q2), as consolidated same store sales rose just .1 percent YOY. Company CEO Edward Stack believes that retail disruption provides DKS with long-term opportunities and that the company needs to invest aggressively, both in brick & mortar and its marketing efforts, to protect its market share.

Howie Long-Short: DKS recently launched a private label compression and training clothing line named Second Skin, to compete with Under Armour (UAA). It’s certainly worth a shot. The odds of developing a successful private label in-house must be better than banking on a vendor that wants to go DTC (i.e. NKE) to drive future growth.

Fan Marino: Dick’s is doing athlete meet and greets at each of their grand openings. If you happen to be in Medford, MA Sept. 15-17th, Celtics 1st round pick Jayson Taum will be in attendance; while Kings star Buddy Hield will be at the Roseville, California opening that same weekend. 

DICK’S Sporting Ramps Up Store Expansion, To Add 10 Outlets


Finish Line (FINL) scaled back profits estimates after receiving disappointing preliminary sales figures (down 3.3% YOY for Q2), and the share price has since decreased by nearly 20%. Shareholders had anticipated low, single digit percentage gains, before expectations were reset. Same-store sales are now expected to fall 3-5% for the full year, with adjusted per-share profit estimates dropping to between $.50-$.60, from a forecast of $1.12-$1.23. CEO Sam Sato described the athletic footwear market to be “competitive and promotional”, confirming what DKS CEO Edward Stack said earlier in the month. The company also announced the adoption of a shareholder rights “poison pill” plan designed to prevent unwanted takeover advances, after U.K. based competitor Sports Direct International (LSE: SPD) raised its stake in the company from 9.2% to 19.9% in June.

Finish Line plunges 28% after trimming outlook as sporting goods stocks tumble

Howie Long-Short: Not familiar with Sports Direct International? The company owns 468 stores in the UK and another 289 Internationally. Its portfolio of brands also includes sporting equipment companies Dunlop (in most markets) and Everlast. SPD is working to expand into the U.S. market, having purchased 50 Bob’s Stores and Eastern Mountain Sports outdoor adventure schools in June.

Fan Marino: The Finish Line relies heavily on Nike, generating 70% of its sales on NKE products. I find that remarkable. Everything NKE produces eventually hits clearance. The company will run 25% off of clearance, several times/year. I find no benefit to shopping and paying retail on athletic shoes.


After falling short of analyst estimates on same store sales (2.4% growth vs. 3.5% estimated) and the announcement of a profit warning, Dick’s Sporting Goods (DKS) shares dropped more than 13% (22.71% YTD), for the company’s biggest one-day decline in 3 years. DKS attributed the loss to a “challenging retail environment”, yet announced it would be moving ahead with plans to open 43 more stores this year. The plan would seem counter-intuitive to the announced goals of cutting costs and streamlining operations. On a positive note, CEO Edward Stack said the company is pleased with the performance of its newly relaunched e-commerce site.

Dick’s Sporting Goods’ stock tumbles on weak sales, tracking for biggest 1-day drop in 3 years

Howie Long-Short: You have to appreciate the aggressive poker strategy Stack is playing here. Doubling down and pushing all his chips to the middle of the table. Unfortunately for stock holders, he’s gambling with your money.

Fan Marino: NKE selling direct to consumer on Amazon is going to be the final nail in the coffin for a sporting goods industry that relies heavily on the wholesale revenue generated by NKE goods.


Hibbett Sports (HIBB), a regional sporting goods chain, issued a profit warning that its 100+ stores will report a 10% drop in same store sales, for the Q2 ’17. The news sent HIBB shares tumbling 30% and caused the prices of several other sporting goods and sneaker retailers (FL, FINL, DKS, NKE, UAA) to plummet along with it, to a total shareholder loss of $2.5 Billion. The chain has recently launched, albeit a bit late, a new e-commerce platform that will integrate with its stores, in an attempt to stop the trend.


Shares of this sports retailer are crashing, dragging Foot Locker, Nike down with it

Howie Long-Short opines: It seems buying footwear online is becoming more and more accepted by consumers. And Hibbett (52% of sales from footwear) just realized they should, probably, have a website? Uh oh.

Fan Marino says: HIBB shareholders have to wonder what the marketing department has been up to since 2005.