Under Armour says earnings growth to slow over next two years

(Reuters) - Under Armour Inc UA.N, the No.2 U.S. sportswear maker, said earnings growth for the next two years would be "less than expected" after reporting its slowest quarterly sales growth in six years, hurt by slowing growth in North America.

People work out at the Under Armour booth as the company promotes the Health Box, a Connected Fitness system, during the 2016 CES trade show in Las Vegas, Nevada January 8, 2016. REUTERS/Steve Marcus

The company’s shares were the top loser on the New York Stock Exchange, after falling as much as 14.9 percent to $32.25, the biggest intraday percentage loss in more than seven-and-a-half years.

Company executives on a conference call said that earnings growth in percentage terms would be constrained to the mid-teens as the company pours more money into its footwear, online and international businesses.

The forecast was down materially from company’s last analyst day goal of 23 percent, William Blair analyst Sharon Zackfia said.

“Despite the overall robustness, there are a few emerging signs that Under Armour is now headed into a tougher period. Foremost among these is the lower domestic growth rate within North America,” Conlumino retail analyst Carter Harrison said.

Although, net sales in North America grew 15.6 percent in the third quarter ended Sept. 30, it was below the 20 percent mark that the company normally breaches, Harrison said.

Apparel growth across the United States is slowing and full year revenue in 2017 and 2018 is expected to grow in the low 20s range, Under Armour CFO Chip Molloy said on the conference call.

The last time the company reported revenue growth in this range was in 2010, when sales rose 24 percent.

Promotions are rising, suggesting sell-through is slowing as German sportswear maker Adidas ADSGn.DE, and denim as a trend re-emerge, Jefferies analyst Randal Konik said.

Adidas has been gaining market share in North America, and has raised its full-year forecast for the fourth time this year.

Still, Under Armour’s total quarterly sales rose a healthy 22 percent to $1.47 billion, helped by demand for new styles such as Slingform and Bandit 2 in running shoes, and for men’s and women’s training apparel.

Net income rose 28 percent to $128.2 million. On a per-share basis, earnings per share rose to 29 cents from 23 cents in all its stock classes: Class A, B and C.

Analysts on average had expected a profit of 25 cents per share and revenue of $1.46 billion, according to Thomson Reuters I/B/E/S.

Under Armour shares, which have lost 20 percent in the past year, were down 12.6 percent at $33.11 in morning trading.

Reporting by Jessica Kuruthukulangara and Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta