What Happened?
Shares of athletic apparel company Under Armour (NYSE:UAA) fell 18% in the afternoon session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.
From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
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What The Market Is Telling Us
Under Armour’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for Under Armour and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock gained 32.7% on the news that the company reported impressive third-quarter 2024 earnings, which blew past analysts' operating margin and EBITDA expectations. Notably, under its new leadership, the company shifted its ecommerce and retail strategy towards a more premium offering, which led to improvements in average order value and higher margins in the DTC channel.
Looking ahead, the company raised its full-year adjusted operating income guidance. This was a great sign as many companies changing their strategy often have to endure some pain in profitability due to investments before things get better. UAA seemed to be able to pivot and do so without hurting its financial profile thus far. Overall, this was a good quarter, and the market seems excited about margins and guidance.
Under Armour is down 33.2% since the beginning of the year, and at $5.44 per share, it is trading 51.1% below its 52-week high of $11.13 from November 2024. Investors who bought $1,000 worth of Under Armour’s shares 5 years ago would now be looking at an investment worth $658.70.
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