Under Armour cut at JPMorgan on industry overhang

By Sam Boughedda

JPMorgan downgraded Under Armour (NYSE:) to Neutral from Overweight, cutting its price target on the stock to $10 from $13 per share in a note to clients on Monday.

Analysts told investors in a note that there is an industry inventory overhang into summer/fall 2023.

“Larger picture, management is now citing Summer to Fall ’23 at the earliest for the ‘inventory overhang’ to be worked through, which has created an elevated promotional environment across the sector ‘longer than expected’ for UAA,” wrote analysts.

“Specifically, UAA sees FY23 GPM contracting by ~425bps Y/Y, with roughly one-third of the pressure (~140bps) tied to the negative impact of higher promotions and discounting, as UAA manages through its own inventory (+50% in F3Q Y/Y vs. sales growth +3% Y/Y) in addition discounting more than expected as a result of the “inventory bloat” across the sector to remain competitive,” they explained.

Analysts also pointed out that there are direct-to-consumer near-term conversion challenges and a long-term structural concern for Under Armour.