Under Armour shares dip after Dick's Sporting Goods blames the athleisure wear company for weak sales

Key Points
  • Under Armour shares fell Wednesday morning before regaining some ground.
  • The company was called out by Dick's Sporting Goods for contributing to the retailer missing sales expectations during the latest quarter.
  • Under Armour has been distributing inventory into more low-price retailers, frustrating companies like Dick's.
Trading Nation: Athleisure stocks race ahead
Trading Nation: Athleisure stocks race ahead

Under Armour shares tumbled Wednesday morning after Dick's Sporting Goods blamed the athleisure wear company, in part, for missing sales expectations during the latest quarter.

Dick's said sales of Under Armour, which has been moving into more low-price retailers like , declined during the fiscal second quarter. The moves by Under Armour have frustrated companies like Dick's that try to sell inventory at higher prices. Shoppers are now seen flocking elsewhere for a better bargain.

Under Armour shares initially fell more than 7 percent Wednesday morning on the news but later pared those declines and closed the day up less than 1 percent. Dick's shares closed the day down about 2.2 percent.

A representative from Under Armour declined to comment on this story.

"As expected, sales were impacted by the strategic decisions we made regarding the slow growth, low margin hunt and electronics businesses, which accounted for nearly half of our comp decline," Dick's Sporting Goods CEO Ed Stack said in the company's earnings release. "In addition, we experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution."

On a call with analysts and investors, Stack went on to say that the challenges with Under Armour should subside in 2019, as Dick's finds new inventory — including fresh items from Under Armour — to fill its shelves.

"Our Under Armour business has been difficult," the CEO said. "We are ... looking at how we can grow moving forward. ... Between us, we think we are going to get this figured out."

Stack said he's excited about Under Armour displaying more "premium" merchandise at Dick's stores, like the HOVR sneaker, and sneakers and clothing from Under Armour's new line with Dwayne Johnson.

"There will be a significant change [at Dick's] in the direction of Under Armour," he told analysts and investors Wednesday morning.

Under Armour shares have still climbed more than 45 percent so far this year, bringing its market cap to about $9.4 billion. Shares of Dick's Sporting Goods, which also fell sharply in early trading Wednesday before regaining some ground, are up more than 20 percent over the same time period.

Under Armour reports mixed Q2 results
Under Armour reports mixed Q2 results