What's The Read For Under Armour From Nike's Struggles?

While Under Armour Inc UAA shares are pushing higher on Friday following an upgrade from Jefferies citing a compelling growth story from the company, Oppenheimer analysts are not as convinced.

Nike’s recent struggles and need for a further push in North America to combat adidas AG (ADR) ADDYY’s momentum does not bode well for Under Armour. Product pricing has been critical in Under Armour's battle with Nike Inc NKE following the brand's entrance into Kohl’s Corporation KSS stores a month ago. Oppenheimer is not convinced that Under Armour’s higher price point is justified.

“Right now 2/3 of NKE’s product at KSS is being discounted, making UAA’s out-the-door price actually higher than NKE. With NKE already well established with KSS consumer, given now lower price and 8x more choices, we question what’s behind driving consumer to UAA,” said Oppenheimer on Friday.

Disconnect Between Trends And Strategy

Current trends do not align with Under Armour’s current strategy. With Nike seeing challenges on the retail and wholesale side, the retro shoe trend still going strong, and with adidas regaining its share as the No. 2 sportswear company, Under Armour will continue to be pressured. Analysts believe these factors could lead to another quarter of gross margin miss in first-quarter 2017.

While Under Armour remains a growth story globally, North America is quickly slowing for the brand. With Nike stepping up its innovation in running and basketball, Under Armour’s key footwear categories, analysts are generally not convinced of Under Armour’s value proposition. Oppenheimer is maintaining its EPS estimate of $0.38 for 2017.

Under Armour shares were up 4.85 percent at $19.90 at time of publication.

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