- Facebook/Under Armour
- Shares of Under Armour fell 5% after Susquehanna Financial Group’s Sam Poser downgraded the stock.
- He said that the company is following in the footsteps of Reebok, which cheapened its brand by selling products to low-cost retailers.
- Poser maintained that Under Armour may not be able to recover from its poor brand management decisions.
- Check out the real-time stock price for Under Armour.
Under Armour‘s stock fell by as much as 5% on Tuesday after Susquehanna Financial Group Analyst Sam Poser downgraded its stock.
Poser criticized the company for going the way of Reebok by advertising to lower-cost retailers such as Kohl’s, DSW, and Famous Footwear. He believes that could cause high-end retailers such as Dick’s Sporting Goods and Hibbett Sports to lose faith in Under Armour because they may see it as cheapening its brand.
Reebok once had $1 billion in annual revenue, but is now driving under $200 million in sales. Poser warned that Under Armour may suffer the same fate.
“Reebok opened up moderate distribution to sustain revenue growth and it eventually nearly mortally damaged the brand,” he wrote.
High-end retailers have already planned to bring their Under Armour business down double-digits in 2017, a trend that will likely continue in 2018, Poser said. He added that the company will need to pull its products from the low-cost retailers, create better products, and provide new offerings and styles to stand a slim chance of reversing its fortunes.
This is troubling for a company that has had trouble remaining relevant with consumers following the departures of a few key executives. Last quarter, Under Armour lowered its guidance after reporting disappointing sales.
Posner downgraded the stock to Negative and set his price target at $11 a share, down about 27% from current levels.
Under Armour shares are up 1.22% this year.
- Markets Insider
To read more about how Under Armour is struggling with forces that may be beyond its control, click here.