Under Armour’s (NYSE:UA) competition sinks
Today's Financial News - Posted December 11, 2008
Investors in the athletic apparel industry are learning the hard way that their companies are in a rough industry. Gildan Activewear (NYSE:GIL) and Lululemon Athletica (NASDAQ:LULU) shareholders already learned their lesson. Under Armour (NYSE:UA) investors are next.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Under Armour (NYSE:UA) investors will not be in their hype-induced fog much longer. While over-emotional investors keep the company’s valuations in sky-high territory, industry cousins are dropping to their knees.
While the rest of the market is barely flirting with single-digit P/E ratios, Under Armour remains sorely overpriced with an earnings multiple of nearly 30. It is proof that investors continue to marvel about the company’s past instead of studying its future.
For proof of where this Baltimore-based company is headed, take a look at two of the market’s worst performers today, Gildan Activewear (NYSE:GIL) and Lululemon Athletica (NASDAQ:LULU). Shares of the company are down by more than 30% and 20%, respectively.
Get ready to join the worst-performers list
Why are shares of these indirect Under Armour competitors down today? Nobody is buying their products. And if they do, they are getting them for a steep discount.
Gildan announced this morning that it expects “material” weakness in the athletic apparel market during 2009. Even worse, the company announced fiscal fourth-quarter results that are down nearly half of where they were this time next year.
Lululemon’s shares are on the decline thanks to news that the company drastically reduced its 2009 outlook. Earlier, it was expecting annual earnings between $0.68 and $0.71 per share. Today, it tells us to expect just $0.55 to $0.57 per share.
The news throughout the athletic-apparel industry is downright dismal. How Under Armour investors think their company can rise above the pain is beyond me. With the company’s bloated valuation and over-emphasized branding strategy, the company stands to lose the most as its perch collapses.
With shares of Under Armour trading over the $25 mark, smart investors will grab what is left of their money and run.
Take a lesson from the competition. 2009 is going to be a killer for this industry.
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