Under Armour's Poor Product Segmentation In A Moderate Channel Will Pressure Sales, Margins

Under Armour Inc (NYSE: UAA)'s stock is in the midst of a brief rally partly due to expectations of a surge in demand for basketball shoes, especially after the company's most notable basketball superstar Steph Curry won his second NBA champion title.

But some among the Street aren't buying the hype, including Susquehanna Financial Group's Sam Poser who maintains a Negative rating on Under Armour's stock with an unchanged $14 price target.

In a research report on Thursday, Poser stated that even if the upcoming release of Curry 4 shoes lives up to expectations the fact remains it isn't enough to become positive. Specifically, it is "becoming clear" that strong footwear sales and incremental sales from new channels such as Kohl's Corporation (NYSE: KSS) won't offset lost sales from The Sports Authority and other bankrupt chains.

Meanwhile, some of Under Armour's retail partners are even looking to lower the amount of business due to a poor product segmentation, the analyst added. Also, many retailers have no desire to "get caught in a promotional free-for-all which is likely to occur" when retailers like Kohl's continue discounting products — as it has done within weeks of receiving its initial shipments.

Bottom line, Under Armour has shown "little to no progress" to create marketable products that "resonates from a fashion perspective" while its footwear line "cannot compete with the vault of compelling athletic lifestyle footwear" from competing brands.

At time of publication, shares of Under Armour were down 3.53 percent at $21.89.

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