We recently compiled a list of the 10 Footwear Apparel Stocks Affected By China Tariffs. In this article, we are going to take a look at where Under Armour Inc. (NYSE:UAA) stands against the other footwear apparel stocks.
Donald Trump’s sweeping tariffs on China, Mexico, and Canada have caused a lot of footwear and apparel stocks to crash. Even though the President paused tariffs on Canadian and Mexican goods for a month, the 10% tariffs on China are still in place.
Fashion brands provide an interesting investment opportunity. Due to their loyal following, they have the ability to raise prices to take care of tariffs. In a similar way, these brands have become quite agile in diversifying their supply chain since the pandemic, so sourcing products from outside China is also a possibility for many. More than these brands, it is the retailers that will get hurt as their value proposition to their customers may get hurt when brands raise prices. However, these retail stocks are not a part of our discussion for now.
In order to come up with our list of 10 stocks affected by Trump’s tariffs on China, we only considered stocks with a market cap of at least $1 billion and a product sourcing mix exposure to China of at least 5%.
A shopper browsing the wide selection of trendy footwear in a franchised store.
Under Armour Inc. (NYSE:UAA)
Under Armour Inc. is a developer, marketer, and distributor of athletic performance footwear, accessories, and apparel for youth, men, and women. It supplies its products through independent distributors, wholesale channels, and e-commerce websites. The company sources 14% of its products from China.
UAA has just announced its quarterly earnings report exceeding analyst expectations. It also raised its full-year guidance amid improving demand in both Asia and North America.
One of the earnings highlights was the company’s 2.4% improvement in gross margins, which are now at 47.5%. While foreign exchange impact has helped improve these margins, management’s decision to rein in promotional activities has helped save costs. Lower freight costs also contributed to the gross margins during the quarter.
UAA may continue to receive a mixed response from investors as the company is in the midst of a transformation, switching to a category-focused operation which the management thinks will enhance its execution in some of the key categories the company operates in. Here’s what the CEO had to say about the transformation plans:
As we sharpen our focus on strengthening the Under Armour brand, our updated product strategy and enhanced marketplace discipline combined with the shift to a category-led operating model are driving our transformation.
Overall UAA ranks 7th on our list of the footwear apparel stocks affected by China tariffs. While we acknowledge the potential of UAA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as UAA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article was originally published at Insider Monkey.
Hedge Fund Resource Center