Under Armour Shares Fall 13% After 2008 Forecast Cut Again

The guidance cut comes as Under Armour suffers from higher-than-expected cancellations and a drop in orders. The news also sent shares of Lululemon Athletica Inc. (LULU) to a 52-week low, while other companies that serve the athletic space also showed weakness.

Shares of Under Armour were recently down $2.86, or 13%, to $19.46. The stock is down 57% in the last 12 months. Shares of the company fell as much as 18% and hit a intraday low of $18.25.

The grandfather of the sector, Nike Inc. (NKE), fell 5.2% to $46.91, while Finish Line Inc. (FINL) shares were flat at $5.20. Bebe Stores Inc. (BEBE), which makes women's sportswear line Bebe Sport, declined 7.7% to $5.35.

Meanwhile, Lululemon, a yoga-wear retailer, fell 5% to $6.39. The stock, which is down 81% in the last 12 months, hit a new 52-week low of $6.11. Its 52- week high is $37.33, hit May 16.

In December, Lululemon said trends in the macro environment and the weaker Canadian dollar were hurting its business performance, nudging the company to lower its 2008 guidance.

Wedbush Morgan Securities analyst Jeff Mintz in a research notes said Under Armour weakness is a results of lack of discounting in a difficult retail environment.

"While the economy clearly had an impact on these results, we believe the issues were exacerbated by limited markdowns in a very promotional retail environment," said Mintz, noting the company's operating margins are likely to be significantly lower year-over-year after being up in third-quarter.

He added the company's 2009 revenue growth likely to be limited, excluding the running shoe launch. If the consumer environment remains as difficult as it has been, and the company maintains its full price stance in a very promotional environment, we believe revenues could go even lower than currently expected," wrote Mintz.

Meanwhile, Needham analysts Sean McGowan said Under Armour investment "story" has changed.

"We believe these sales and earnings could radically change investor perception of UA for quite some time," McGowan. "It shows that the brand is vulnerable to economic weakness, and is no longer the impenetrable island of strength for retailers. It mars the growth record and, in our view, may jar the confidence of the most loyal investors."

Under Armour now expects 2008 earnings from operations of $76 million to $78 million on revenue of $725 million to $726 million. Under Armour cut its outlook in October to $97.5 million to $104.5 million and $750 million to $765 million, respectively.

For the quarter, Under Armour sees earnings of 16 cents to 18 cents a share on revenue of $179 million to $180 million. Analysts surveyed by Thomson Reuters projected earnings of 49 cents on revenue of $210 million.

The company said the quarter's results were hurt by cancellations in the U.S. wholesale business and lower-than-expected sales. Retailers across the board have cut their outlooks as shopper cut back on discretionary spending amid weak credit and employment concerns.

-By Aja Carmichael, Dow Jones Newswires; 201-938-5218, aja.carmichael@dowjones.com

(Katherine Wegert also contributed to this report.)

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