Under Armour Inc (NYSE:UA) shares dropped the most in more than seven years after the company warned that growth rate will be less than expected, raising concerns that the amazing growth streak will finally end. The company expected revenue to increase in the low 20 percent range during 2017 and 2018.
“While we expect to continue to significantly outpace the apparel industry, the growth rate going forward will be less than expected from our Investor Day in 2015,” the company said during prepared remarks on its earnings call Tuesday morning.
The athletic retailer reported lower margins in the third quarter as the company invested in less profitable categories like soccer, golf and basketball. The company is also investing aggressively overseas, opening more stores. Gross margins for the third quarter fell to 47.5 percent from 48.8 percent last year.
“The growth is still there, and it requires significant investment,” Plank said on a call with investors. “It is time for us to invest.” The stock dropped as much as 14.3 percent to $32.49 in the early trading.
Net income was $128.2 million, or 29 cents a share, compared with $100.5 million, or 23 cents, a year earlier. Revenue rose 22 percent to $1.47 billion. Analysts on average had expected a profit of 25 cents per share on $1.45 billion in revenue. Apparel revenue rose 18 percent to $1.02 billion in the third quarter, while footwear sales jumped 42 percent to $279 million, helped by strong growth in running and basketball shoes.