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Sell Block: Under Armour Has to Go

It’s time to dump Under Armour, Cramer said during this week’s edition of Sell Block, especially after this week’s insider selling.

CEO Kevin Plank vigorously defended his company after analysts expressed concern about the retailer’s inventories, but then sold 1.5 million of his shares in Under Armour . It’s not that insider selling is bad, but Cramer said he felt foolish after championing Plank’s defense, he said.

Regardless, an increase in inventories means UA would have had to discount its apparel to move it, and discounts equal estimate cuts. That’s a definite loss of momentum for this high-multiple stock, so it was probably time to sell UA anyway, Cramer said.

Look at the facts: Under Armour’s inventory and loss in momentum, the stock is trading at twice it’s growth rate – which is where Cramer downgraded Starbucks and Whole Foods, two longtime favorites – and the remaining markets the company wants to enter are fraught with competition and lower margins.

It’s time to let go of UA.

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