Under Armour Downgraded As Nike Price Wars Intensify

FBR & Co. analyst Susan Anderson downgraded shares of Under Armour Inc (NYSE: UAA) from Market Perform to Underperform with a price target slashed from $20 to $14.

Anderson's downgrade follows recent checks, proprietary surveys and current trends that all point to continued sales and margin pressure for Under Armour. Most notable, the analyst sees a price war with Nike Inc (NYSE: NKE) "intensifying" after Under Armour's expansion into Kohl's Corporation (NYSE: KSS) will force Nike to "defend its turf."

Specifically, Under Armour has been "significantly more promotional" year-over-year at its direct-to-consumer business. The same observation was made in sporting good stores and department stores, including a recent 25 percent off sale in Kohl's.

Losing Ground In Shoes

Anderon's annual athletic footwear survey showed that Under Armour's appeal to consumers has fallen to the point where just 27 percent of shoppers indicated they're more likely to buy Under Armour's shoes as opposed to 31 percent a year ago. Twenty-seven percent of those surveyed said they're less likely to buy Under Armour shoes today, which marks a worsening from 22 percent last year.

Also not helping Under Armour's shoe sales is the fact the company is raising the prices of some of its shoes this year at a time when consumers are stating they're less willing to pay higher prices.

Finally, Nike and other shoemakers have successfully ramped up their shoe innovation over the years but Under Armour's innovation is "lacking," which is also causing Under Armour to miss out on valuable shelf space in footwear retailers.

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