Jefferies On Under Armour Following Warning: 'Sports Authority Shouldn't Be A Big Deal'

Jefferies said the Sports Authority bankruptcy is a "minor near-term headwind" for Under Armour Inc (NYSE: UA), which slashed its 2016 outlook after Sports Authority's move to liquidate instead of restructure.Under Armour, which makes athletic apparel and footwear, said 2016 revenue from Sports Authority is now expected to be $43 million, down from prior estimate of $163 million (about 3 percent of sales). As such, 2016 revenue guidance was lowered by $75 million to $4.925 billion from $5 billion. Including a $23 million impairment charge in the second quarter, 2016 operating income is now targeted at $440 million - $445 million from $503 million - $507 million.Jefferies cut its 2016 EPS estimate to $0.60 from $0.67 and EBITDA estimate to $593.5 million from $640 million. The consensus EPS estimate stands at $0.58 for the full year.Analyst Randal Konik says the Sports Authority event is largely one-time, and believes the Under Armour brand is still in the early innings of growth."We continue to see robust growth ahead for UA, as the company remains under-penetrated in nearly every key product category and geography," Konik wrote in a note. The analyst said the company's footwear segment will benefit from the strength of the Stephen Curry franchise (including the upcoming release of the '2 Rings' Curry 2 sneaker).Konik also sees opportunity in women's apparel, and international (especially in China), and new 'Connected Fitness' initiatives such as HealthBox.However, the analyst is concerned on high expectations, valuation, and the potential rise of adidas AG (ADR) (OTCMKTS:ADDYY) back into the US market.On Adidas, Konik highlighted that the German company has been gaining traction in apparel and footwear again. This is negative for Under Armour as the analyst believes the UA's stellar growth in men's apparel and growing presence in footwear has come at the expense of shelf space for Adidas. "On one hand, we see UA having emerging brand dominance within the attractive and growing sportswear market. On the flip side, we note high expectations, leaving little room for error. As such, we remain Hold rated for now," Konik added.According to TipRanks, Konikhas a success rate of 40 percent with an average return per recommendation of -3.3 percent. The analyst is ranked 3,538 out of 3,972 analysts.At the time of writing, shares of Under Armour fell 5.65 percent to $35.57 after hitting a new 52-week low of $35.35. Konik has cut the price target on the stock to $42 from $45.