Not even Stephen Curry’s star power could offset the damage done by The Sports Authority’s bankruptcy.
Shares Under Armour (UA) dropped 6% in early trading Wednesday, after the sports apparel maker revised its expected full year guidance downward, citing The Sports Authority‘s bankruptcy. When news of a potential bankruptcy broke earlier this year, Under Armour noted that the event would not likely impact its sales and reiterated its full year guidance.
But now that The Sports Authority, one of Under Armour’s wholesale customers, has decided to liquidate rather than restructure, the apparel maker has shifted full year revenue guidance down to $4.925 billion versus its previously reported estimate of $5 billion—a decrease of $75 million.
According to Under Armour’s Tuesday press release, potential sales directly lost from Sports Authority is higher, about $120 million. Under Armour disclosed that it was only able to recognize about $43 million of the originally planned $163 million in revenue with the Sports Authority for 2016. Under Armour also expects a $23 million write down in relation to the bankruptcy.
Under Armour previously upgraded its 2016 outlook to $5 billion in revenue from $4.95 billion in April. Under Armour was aware of Sports Authority’s bankruptcy at the time.
“While The Sports Authority’s bankruptcy impacts our 2016 outlook, our brand’s momentum is stronger than ever as we continue to see growth and increased demand across all categories and geographies,” said Kevin Plank, Chairman and CEO of Under Armour in a press release statement. “This one-time event will not impact our focus on making the best decisions for Under Armour through investments that protect and drive our growth.”
Over the past five years, it also seems that Sports Authority has accounted for lesser percentage of Under Armour’s sales. While 9% of sales could be attributed to Sports Authority in 2011, just over 3% of Under Armour’s sales would have come from Sports Authority this year.
Under Armour’s 2016 operating income is also expected to fall from a range of $503 million-$507 million to $440 million-$445 million.
The company has also undertaken a series of high-profile contracts with celebrities including Stephen Curry and Dwayne “The Rock” Johnson in the past few months. The Golden State Warrior point guard in particular has been credited with driving up both Under Armour’s market cap and shoe sales.
