Under Armour: Are #MeToo and Growth Problems Connected?
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With your money briefing, I'm J.R. Whelan at The Wall Street Journal in New York. Under Armour stock shareholders should have been doing their homework when the you-know-what hit the fan a few months ago. Now many of them have endured a nearly 10% drop in the stock. We'll explain more in a moment. First, these money in market stories you should know. The number of Americans filing applications for new unemployment benefits fell last week by the most in three and a half years. Initial jobless claims decreased by 27,000 to a seasonally adjusted 206,000, and the week ended December the 8th. The retreat in the claims level the last two weeks should reinforce the view that the labor market remains historically tight and employers are generally reluctant to let workers go.
How did Under Armour’s #MeToo allegations first come to light and affect the stock?
And Bitcoin fell to $3,233, down 6.1% since Wednesday at 5 p.m. ET. That's its lowest level since September 15, 2017. It's been tough going for the cryptocurrency since it plunged through the $6,000 level on November the 14th, falling in four of the past five trading weeks. Smaller cryptocurrencies such as Ether, Litecoin, XRP and Bitcoin Cash have moved lower with Bitcoin as well.
It's been a rough couple of months for sports apparel company Under Armour. It became entangled in the Me Too movement, and just this week the company warned of slower growth. But are the two connected? Heard on the Street columnist Elizabeth Winkler is here to discuss. So Elizabeth, the problem involving how visits to strip clubs were charged can be traced to bad corporate governance, and bad governance can affect many areas of a company.
That's right. Yeah, it's not just about women feeling uncomfortable at a company or, you know, not being treated fairly.
Why do investors sometimes ignore workplace misconduct until financials worsen?
You know, usually we've now come to understand that bad corporate governance impacts the financial performance of a company more broadly and can be an indicator of other problems beyond just, you know, the treatment of women.
So to what degree is the company warning about slower growth?
Well, at an annual investor meeting yesterday, it lowered its outlook at least below what analysts were hoping for. So that was quite disappointing for investors.
And that was on December the 12th.
That's right.
It's been a struggle for Under Armour to keep up with the rapid changes in the sports apparel landscape, and that's a much bigger problem for the company.
Yes, it really took off in its early years. The stock hit a high in 2015, but it hasn't really evolved, for one, with the athleisure trend. Under Armour is more of a gym-only, performance-driven brand, or at least that's how it's perceived. And athleisure brands like Lululemon and Athleta have become really popular. Sports Authority, which was a major retailer for Under Armour, went bankrupt, so that's also been damaging.
And Under Armour says it's going to be focusing more on footwear and women's wear going forward. They've got some pretty strong company in that space.
Yeah, that means they're going up against Adidas and Nike and Lululemon. And trying to steal sales, especially in the women's wear market, is challenging when so many women really love Nike, they love Lululemon.
And in your column, you say that investors should have been more wise in observing things and that company-sponsored strip club visits are never a good omen. That's how you finish up your column. More broadly, it's a good lesson for investors to do their homework.
It really is. It's interesting because when the Journal reported over a month ago that women were experiencing really inappropriate behavior at Under Armour and the strip club visits charged to corporate cards were just one factor there, the stock didn't move at all. Investors... apparently didn't care. They didn't think it mattered. It wasn't important. As long as the company appeared to be doing well financially, the fact that behavior there was inappropriate wasn't relevant to them. And then you find out a month later that some other problems are going on with the company's performance as well.
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