Sportswear and footwear manufacturer Under Armour (UA.US) is extending yesterday's share price gains in pre-market Wall Street trading. Markets are trying to assess the sale by CEO and founder Kevin Plank of $100 million in company stock to the BDT Capital Partners fund managed by Byron Trott, known for his close friendship with Warren Buffett. Also Lululemon (LULU.US) shares are up 14% in premarket after Q1 results which improved Wall Street sentiment around the sector.
- Under Armour's share price is near a dozen-year low although in Q1 the company reported a net margin of more than 6%, a record since at least 2010 - far higher than Adidas and Puma, although lower than Nike. The company's 2022 revenue was $5.8 billion versus $5.68 billion in 2021, which the market perceived as weakness for the company in an inflationary environment;
- Investors didn't like the company's forecast issued in May, which estimates fiscal 2024 earnings per share of $0.47 to $0.51 versus analysts' $0.61 projections. At the same time, the seasonality associated with sports may favor higher demand for Under Armour's summer season offerings;
- Embracing $100 million in Under Armour shares, the BDT fund already held an undisclosed amount of them. Kevin Plank will remain the company's largest shareholder with 51 million shares (12% of total issues, 65% of voting rights).
- The former CEO of Under Armour and founder of the company spoke positively about the company's potential and the selected new CEO, Stephanie Linnartz. According to Plank, the private transaction is aimed at closing his personal financial obligations related to Baltimore miat and business partners;
- According to its largest shareholder, Plank, the introduction of a new shareholder in the form of BDT Capital, whose hallmark is a long-term investment strategy, demonstrates its faith in Under Armour's business and its returns to shareholders;.
- BDT Capital's CEO, Byron Trott already has a nearly 10-year episode in the fashion industry (an investment in Tory Burch), and stressed that the fund has faith in the Linnartz CEO's new strategy.
Under Armour (UA.US) shares, D1 interval. Source: xStation5
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