Here’s a follow-up to our earlier note on UA. How is business? Here’s some charts showing both apparel and footwear point-of-sale info for UA. It would be unfair to say that it is getting clocked out there, because performance – broadly speaking – is fine. But when you end the prior quarter with inventories +74%, you need better than “fine”, you need “outstanding”. That’s not in the cards.
Versus last year, we’re seeing UA’s share gains in apparel continue to slide – to the point where the latest trends are actually down (we look at this data on a trailing 3-week basis).
Similarly, the company is seemingly not gaining traction in footwear. That’s no revelation to the Street at large. But the reality is that UA went out and hired Gene McCarthy – who we’ve thought to be among the best talent in the space – and after 25 months, they still have little to show for it (at least based on product quantity, quality and performance).
Will UA get Footwear right? Yes, we definitely think so. But the clock is ticking, and UA is running out of time where the Street will simply give them a pass simply because they have a killer brand. In other words, footwear will cost either time or money – and the Street has little tolerance for either.
We continue to think that there’s a big duration mismatch here. When the short-term investment factors come to roost just as 40% sales growth numbers are incrementally slowing (still stellar, but what matters is on the margin), we think there will be a much better shot to buy UA lower.
Brian P. McGough
Managing Director