Jefferies Cautious on Under Armour Ahead of Earnings on January 26th

Jefferies & Company has published a research report on Under Armour

maintaining its Hold rating ahead of the company's earnings report on January 26th. In the report, Jefferies writes, "We are cautious on UA ahead of earnings next Thursday (1/26) and are lowering our 4Q11 and FY12 estimates. In summary, we think an unseasonably mild winter placed downward pressure on EPS and upward pressure on an already elevated inventory position. We think this could lead to a 4Q EPS miss and lower expectations for 2012. We now see 4Q11 EPS at 57c vs. 63c consensus. Our call-out of an unseasonably mild 4Q is neither new nor unique but one whose impact is being underemphasised by the market. UA is extremely winter-dependent in 4Q with business skewed to apparel styles like ColdGear compression and fleece hoodies. All year long, the company has been building its ColdGear inventories in advance of a fall-winter season which, in retrospect, did not materialize. All in, this combination could result in a 4Q miss along with a bloated inventory position. This, in turn, places pressure on 2012 sales and margins, where expectations are already high." Jefferies also maintains its $75 price target on Under Armour, which is currently trading down $3.87 from yesterday's $76.27 closing price.