On Friday, Evercore ISI issued a revised price target for Under Armour (NYSE:UA), Inc. (NYSE:UAA), reducing it to $6.00 from the previous $7.00, while maintaining an Underperform rating on the company's shares. The firm's stance comes amid concerns over the sportswear manufacturer's strategic direction and innovation capabilities.
The analyst from Evercore ISI expressed skepticism regarding the effectiveness of Under Armour's turnaround strategy, despite acknowledging initial positive steps such as the new $500 million buyback program, a 25% reduction in stock keeping units (SKUs), and new cost-cutting initiatives. There are doubts about the company's ability to deliver product innovation, which has not been seen in recent years.
According to the analyst, impactful new products are unlikely to reach stores for at least 18 months, which represents a delay compared to previous expectations set by the former CEO. The new Chief Product Officer had been expected to introduce significant new products in the second half of fiscal year 2025.
Furthermore, the analyst highlighted that two-thirds of the low double-digit percentage decline in wholesale revenues for fiscal year 2025 was not a result of proactive measures by Under Armour, but rather due to retailers' decisions to reduce their exposure to the brand. This raises questions about Under Armour's ability to stabilize and grow after fiscal year 2025, especially given the uncertainty surrounding the brand's potential to reclaim lost retail shelf space.
The financial institution's analysis suggests that Under Armour's current plan may not be sufficient to ensure a successful recovery and expansion in the competitive sportswear market. The revised price target reflects these concerns and the anticipated challenges that Under Armour may face in the near future.
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