The battle between two industry rivals is heating up. One company is mature, managed by a team of seasoned executives and has a pile of cash. The other company has a powerful brand, but little else.

Shares of Nike (NYSE:NKE) and Under Armour (NYSE:UA) are in the red today as the Street digests the latest earnings figures from the industry’s top dog.

Nike revealed its net income dropped to $341.4 million over the past three months, down from last year’s figure of $490.5 million.

Considering the drop was due to a $200 million re-structuring charge as Nike shed 1,750 workers, the quarter was not too bad. Without the charge, the sportswear maker beat most analyst estimates.

But, of course, the market looks forward, not backwards. That means investors are acting on the company’s outlook released last night, which gives little reason to bid up share price today.

With revenue dropping by 7% last quarter and orders through the next “several” months down by 12% from last year’s figures, the future is not nearly as bright as most had hoped.

In fact, the company’s CEO expects the recovery to mimic the company’s trademark “swoosh” logo, a long, gradual climb.

If that is the case, investors are better off taking their money elsewhere. Anywhere but Under Armour, that is.

All about cash

If the Baltimore-based company’s upcoming revenues and outlook mirror Nike’s figures, Under Armour investors will be downright depressed.

With just $65 million in cash, versus Nike’s whopping position of close to $2 billion, Under Armour had better be prepared to protect the ground it recently stole from its chief competitor.

As the economic malaise continues, Under Armour will be forced to curtail its growth, giving a much more liquid Nike more than enough ammunition to start grabbing market share.

Under Armour has the brand power and the momentum of several years of phenomenal growth on its side, but now that the industry is getting downright tough, only the strong will survive.

With its skin-tight product line, Under Armour may look tough. But we all know the guys with the piles of cash almost always win.

Source: Nike Gets Ready for Competition

The power of the consumer is amazing. Before today’s opening bell, equity futures looked bleak.

Nuclear testing in North Korea spooked global markets. Housing data showed yet another double-digit decline in home prices. And we are down to the last few days before General Motors’ (NYSE:GM) big June 1 deadline.

But all it took was good news from consumers to get the markets surging by more than 2%. Even though the economic data does not show many signs of a long-term improvement, evangelical announcements of “green shoots” appear more than enough to convince Americans the worst is behind us.

With American sentiment on the rise, it is no wonder one of New York’s biggest movers is smack dab in the thick of the discretionary spending sector.

Take a look at Tween Brands (NYSE:TWB) and its 20% surge today. Shares of the company have nearly doubled in value over the last week after management pulled the curtain on the specialty retailer’s latest quarterly figures, surprising investors with better-than-anticipated results.

Since the March lows, shares of the company have soared by over 400%. A re-branding effort has helped the company’s financial results, but surely a rash of consumer exuberance has helped.

Sell the hype

It is safe to say the same kind of “trend” investors that are boosting up shares of Under Armour (NYSE:UA), Sirius XM Radio (NASDAQ:SIRI) and Crocs (NASDAQ:CROX) are creating a top-heavy valuation for Tween.

Certainly, management has done good things with its recent attempts to “re-value” its Justice brand, but after the recent run, any negative turn in consumer spending could send this volatile small cap into a tailspin.

With a share price of over $5 per share, Tween is ripe for a short position. Investors have an opportunity at double-digit profits by riding shares down to a more appropriate short-term valuation of $4 per share.

Even though today’s report from the Conference Board shows Americans are more upbeat than a month ago does not mean the macro-economic factors tugging at this market have suddenly vanished.

Unemployment is still high. Houses are still shedding value. And Americans are still scared out of their collective minds.

As the green shoots slowly turn into tumbleweed during the summer months, Americans are surely going to realize this is no time to be celebrating.

Shorts may be sweating after the recent surge, but they will have their shot in the spotlight once again real soon.

The equities market can only go so far on expectations of a turnaround. Pretty soon investors are going to demand to see real results. So far, there is no turnaround in sight.

Source: Consumers: What Do They Know?

Under Armour (NYSE:UA) is doing what it does best, using marketing glitz to gain the attention of consumers and investors. As I have said countless times before, it is not a sustainable business model.

While slurping down my morning bowl of cereal, I typically watch something with a bit more grit than NBC’s Today Show (even Screech on Saved by the Bell offers more intellectual value), but my wife had the day off work and somehow gained control of the remote.

I am glad she did, because as soon as I saw Under Armour’s founder Kevin Plank chatting about his company’s “unique” product offerings, I knew my recent preachings were dead-on accurate. This company is getting desperate.

If you follow Under Armour, you know its products, while popular, are certainly not unique. Lower-priced competitors have been busy knocking away the company’s foundation one brick at a time. Plank and his company were hoping for a huge launch of their footwear line, but have failed on several different attempts to gain the attention the company needs to meet shareholder expectations.

Share price won’t need running shoes

In less than two weeks, investors are in for the wake-up call they need. When the company releases its latest earnings figures, Under Armour’s overvalued shares, with a P/E of 23 and all, will get cut to where they belong. I am prepared to see shares drop to $14 or less on news sales were nowhere close to investor-expected levels.

Yesterday’s retail sales figures were a foretelling of what’s to come.

Read the full article here at TFN:Under Armour: Desperate for attention

Before the opening bell, I was chatting with my colleague, Laura Cadden. I told her of my dire outlook for Under Armour (NYSE:UA) and its overpriced and over-hyped product pipeline.

“You can’t say that,” she rebutted. “I love Under Armour.”

Because she is a Baltimore native – the home of Under Armour – it is easy to understand her affection for the company. But once I gave her a handful of figures and circled a few key spots on the stock’s chart, she tossed her emotions aside and agreed with my call.

That’s when it happened.

Shortly after sharing my opinion, in what I assumed was confidence, the news feed fires up and word hits the Street that Morgan Stanley downgraded Under Armour and cut its price target to just $12. The news comes just 24 hours after Caris made a similar announcement.

It was major blow, especially with shares closing yesterday at $18.73.

Tug-of-war investing

I came into the office this morning planning on recommending a short position on Under Armour to TFN Strategic Trader subscribers, but as soon as I read of today’s downgrade, I knew I was too late.

It would have been a perfect play as share price is down by more than 10%.

Just because I called off my plans for the day does not mean the opportunity is totally lost. Under Armour is a great company for trade-savvy investors. Its shares rise and fall in predictable patterns, creating multiple chances to rack up a hefty profits.

Read the full article here at TFN: Tug-of-war investing at Under Armour

This from Taipan Daily

At market extremes (where fortunes are most often won and lost), the wild outliers get closer to reality. Such is the case with the “mega-mall ghost town” scenario.

In the past two weeks, the financial press has been chock-a-block with headlines like “Commercial Property Loses Shelter” and “Struggling Retailers Press Struggling Landlords on Rent.”

“U.S. retailers are expected to begin a wave of post-holiday bankruptcy filings,” the Wall Street Journal writes, “altering the landscape at malls and on main streets across the country.”

One mall store manager – who requested his name not be mentioned – told the WSJ he expects more returns than sales on some days. “We’ll have $5,000 in sales and $7,000 in returns,” he said.

It should be no real surprise, then, to hear that the Consumer Confidence Index just hit an all-time low of 29.4.

As the Trader’s Narrative blog points out, “That’s lower than the 2002 bear market bottom. Lower than the confidence level in 1991. Lower than the early 1980s. Even slightly lower than darkest days of the 1970s bear market.”

And finally, at risk of beating the point into the ground with a flathead shovel, take a look at this Financial Times chart.

That chart only goes back to 1993. If you were to extend it many decades further, you would find that the latest number for U.S. retail sales was the worst in sixty years.

What to Do?

Some say these numbers are so bad they can only get better. I’m not sure I agree. While certain areas of the market are set for a strong bounceback in the coming months, the U.S. consumer’s wallet probably isn’t one of them.

The dire state of the American retail landscape highlights the importance of being selective, on both the investing and trading side, as we head into the post-apocalyptic landscape of 2009 and beyond.

A key task will be sorting out two kinds of stocks: those that are truly once-in-a-lifetime cheap… and those whose consumer-linked business models are “permanently impaired.”

On the trading side, one go-to idea is shorting RTH:AMEX, the Retail Holders ETF.

This is a trade that could make some money, but I can’t help but think there are better ways to play it.

I’m not crazy about being short Wal-Mart (NYSE:WMT), for one – the single-largest component of the RTH index. True, WMT recently gapped down big on lower-than-expected sales… but the Beast from Bentonville has a price to earnings ratio of less than 15, and is more likely to prove a long-term winner than loser in the great retail shakeout.

Another point in Wal-Mart’s favor: they sell stuff that people need to buy. U.S. consumers aren’t about to stop ponying up for toothpaste and diapers and socks, no matter how gloomy the big picture gets.

Why not instead, then, cast a bearish eye on a company like Amazon.com Inc. (Nasdaq:AMZ), which still supports a price-to-earnings multiple of 34 and sells “discretionary” type items (books, CDs, videos, etc.) that people don’t really need?

Sacred Growth Cows

Shorting is a bit like value investing in reverse. As a value investor, you want to find companies that are cheap relative to assets, cash flow and long-term prospects for growth.

As a short seller, you want to hunt down companies with the opposite profile… valuations that are inflated, prospects that are over-hyped, and multiples that don’t make sense.

Zach and I jokingly refer to these crash-and-burn candidates as “sacred growth cows.” When investors fall in love with a concept stock or a great growth story, they often find it hard to let go of their rosy outlook… even when market action suggests strongly that they do so.

I asked Zach if he had any “sacred growth cows” on his radar screen for Death Cross Trader. As usual, he was happy to share a few names off the top of his mental rolodex. Here’s a sample of what he came back with.

1) Blue Nile Inc. (Nasdaq:NILE). Blue Nile is “an online retailer of diamonds and jewelry” with a roughly $300MM market cap.

The idea of buying your sweetie a piece of bling via the World Wide Web never made much sense to me. Per Zach, the NILE business model makes even less sense in this harsh climate.

“The stock still trades in the 20 to 24 times earnings range,” Zach notes, “because investors believe the rich will still buy diamonds.”

Leaving aside whether that’s true, Zach points out that it isn’t even relevant to NILE’s true business model. “These guys actually cater to the Joe Sixpacks of the world… the guys looking to spend $5,000 or less on an engagement ring. Ticket prices are falling and lower sales figures are coming in, yet NILE is still priced like a growth stock.”

2) Under Armor Inc. (NYSE:UA). Under Armor is a wannabe Nike, selling “branded performance products for men, women and youth.” It currently sports an approximate $1 billion market cap.

“Under Armor’s growth areas,” Zach notes, “are supposedly in running shoes, basketball gear, and other categories that could all be seriously hampered by consumer spending cutbacks. Under Armor made its name in football gear, but football season is now over. The company should have seen its best quarter in Q408, but they’re reporting weakness instead.”

Another big problem for Under Armor is the bruising nature of the competition. As times get tougher, the real Nike – sporting a P/E of less than 13 and a market cap of $23 billion – could put the big hurt on its tiny rival.

“It’s pretty scary to see analysts ratchet down earnings expectations by 20% overnight,” Zach says. It might not be the last time for UA.

3) Mystery Coffee Producer.

Zach didn’t want me to reveal the third name because he is working it up for a Death Cross Trader short.

This high flyer, soon to crash and burn, has a market cap of $840MM and an eye-watering P/E of 39 times earnings… pretty hard to justify in a consumer armageddon environment. The company makes its beans (bad pun intended) in the “specialty coffee industry,” selling more than 100 varieties of “whole bean and ground coffee selections.”

I don’t know about you, but it seems intuitive to me that with consumers retrenching, fancy-dancy coffee could well be one of the first items to go.

“To get a roadmap of how I expect this one to trade,” Zach says, “simply pull up a weekly chart of Starbucks (Nasdaq:SBUX). Consumers are fickle, and these hoity-toity coffee guys are a fad.”

“Fad stocks are fun to be long in bull markets… and they’re even more fun to be SHORT in bear markets when they drop like rocks.”

Source: A Heaping Helping of Retail Fail

But while many analysts suggest this company may be a one trick pony – akin to Crocs, (Nasdaq: CROX). They couldn’t be more wrong. The reason its share price was penalized was that analysts were expecting $1.09 instead of the .79 reported.

This is a classic case of overreaction from a negative earnings report.

The fact of the matter is that this brand has developed a premium niche within the sportswear market, and it’s expanding that brand recognition to other areas.

Yes, there are numerous knock-offs of their breathable fabrics. And several competitors for the highly coveted retail space they occupy. But you have to hand it to UA. It was able to outmaneuver entrenched companies like Adidas AG (OTC: ADDYY) and Nike (NYSE: NKE). That wasn’t easy.

Under Armour’s integration into professional and college sports, has put its product into the hands of millions of athletes. From younger athletes see their sports idols wearing UA, to the armchair quarterbacks who want to do the same, its specialty sportswear has mass appeal. That brand dominance will allow it to keep its spot for the long haul.

It’s no surprise, really, that it’s being affected by the current economic downturn – like most other companies. But a few missed analyst estimates does not make a company un-investable – or unprofitable.

Source: Under Armour (UA) Gets Penalized by Analysts

This from Today’s Financial News:

It is tough for many investors to admit, but marketers rule Wall Street. On most days, it is not true fundamentals that rule the Dow. It is the change in the way we perceive a company’s valuation that makes a stock go up or do.

If marketers do their job, share price rises. If they fail, shareholders feel the pain.

Investors rarely weigh a company’s marketing talent in their decision-making process. It is a flaw that could cost them dearly. In many cases, a firm’s marketing team has more to do with moves in its valuation than do changes on its income statement.

A perfect example is Under Armour (NYSE:UA). The company has one of the best marketing strategies in all of business, but even the most talented salesman cannot sell something to a person with no money.

Blinded by the facts

Look around Wall Street. Best Buy (NYSE:BBY) told us yesterday it has witnessed a “seismic” shift in consumer spending. Macy’s (NYSE:M) posted a horrid third-quarter earnings report. And Linens ‘n Things is headed to the history books.

On the other hand, Goodwill Industries reports sales are up by 7%. Ultra-discount stores like 99 Cents Only (NYSE:NDN) and Family Dollar (NYSE:FDO) are seeing their share price soar. Wal-Mart (NYSE:WMT) is the only major retailer with even a semblance of good news.

The only places Americans are spending their money is at the cheapest store they can find.

So what in the world continues to make investors believe Under Armour and its expensive discretionary clothing lineup will maintain historic sales levels?

Let’s face it. The American economy is in a deep recession. The folks that were buying Under Armour’s over-priced and trendy gear are now the ones that have lost their jobs and cannot afford their homes.

The last time I recommended betting against the company, we raked in gains of over 70% in just five days. With share price above $21 today, it is time to do it again.

Here are some facts to prove my point:

-    U.S. retailers recorded their worst October ever, with overall same-store sales dropping by 0.9%.
-    Consumer confidence is at its lowest levels ever.
-    Under Armour continues to operate with negative cash flow.
-    Maverick Capital, which owned over 7% of Under Armour, just unloaded its entire position.
-    The number of shares short has grown to 36.5%.

With figures like those, it is hard to believe investors are willing to maintain the company’s price-to-earnings ratio of 23. It is foolish to think the company will maintain a sales pace anywhere close to levels it has enjoyed lately.

Even the company’s executives know a rough road is ahead. They just lowered their operating income estimates to a range of $97.5 million to $104.5 million. They previously announced expectations of $104.5 million to $105.5 million.

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What if they’re right?

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With consumers basically locking their wallets and throwing away the key, even the new estimates are far too high. With consumer spending at the retail level dropping by nearly one percent, investors should not believe Under Armour will grow its sales by 24%.

Under Armour’s brand is one of the strongest in the industry, but a brand can only take you so far. Once a company matures and enters its slow-growth phase, fundamentals take over and investors take a dramatic hit.

Under Armour’s overly loyal investors have had a tough time realizing this time-tested fact. They will suffer as share price drops towards $15 after the next earnings release.

Unless you take a short position, steer clear of this falling star.

Source: Under Armour (NYSE:UA) Cannot Hide From A Recession

This from Today’s Financial News:

You have to search the equities market pretty hard to find any companies still trading at overvalued prices, but if you look hard enough they are still out there.

One of them is making headlines today. Thanks to the company’s better-than-expected earnings report, shares of Under Armour (NYSE:UA) are trading significantly higher.

Right now, buyers are paying a 12% premium on yesterday’s closing price. Share price was even higher earlier in the day. Buyers are making a big mistake.

Out of all the undervalued gems on Wall Street right now, I cannot imagine why in the world investors are willing to shell out a sizeable premium for this already overpriced stock.

It doesn’t add up

Just look at the earnings figures released today. Over the last three months, Under Armour recorded revenues of $231.9 million, a year-over-year increase of 24%.

Get rid of manufacturing expenses, taxes, and all that other stuff and the company reported a quarterly profit of $27.5 million, or $0.51 per share. Analysts were expecting revenues of $227 million and earnings per share of $0.50.

Sure, the company exceeded forecasts, but not by the margins you would expect to see when investors bid share price up by double-digit proportions.

Because of today’s valuation surge, Under Armour now has a market capitalization of over $1 billion and a price-to-earnings ratio of over 24. That figures is nearly twice as high as the S&P 500 average.

With the company lowering its annual revenue forecasts to $750 million from as much as $775 million, its P/E ratio should be dropping, not rising.

Do not fall for marketing hype

This stock is a prime example of emotional investing and a marketing team’s effect on investors. Share price is artificially propped higher because investors believe the company truly has a long-lasting, high-demand product. But in reality, Under Armour has a terribly weak business model.

Its competitive moat is tiny, which is made obvious by the huge amount of comparable alternative products flooding the market. Plus, the company is right in the middle of an industry highly susceptible to recessionary pressures.

Let’s face it. The first thing consumers will cut out of their budget over the next few months will be trendy, over-priced underwear. If Under Armour wants to keep its products moving off of store shelves, it will be forced to greatly reduce prices. That means margins will be significantly reduced and earnings will be hammered.

My head is spinning watching investors waste their money in this stock. There are much, much better choices. The only investors that will make money on this company are the ones that are smart enough to short it.

Under Armour should be one of the worst performing companies, not one of the top performers. It is as simple as that.

Source: Marketing hype: Watch out for Under Armour (UA)

Andrew Snyder says campaign managers, not economic advisers, are now shaping the bailout plan. This is bad news for US stocks. The Dow Jones Index (DJI) opened 100 points down from Thursday’s close.

Andrew says investors need to go short to profit from this mess. Sportswear retailer Under Armour (NYSE:UA) is primed for a heavy fall. Andrew recommends buying the firm’s January 30 Puts (UAMF.X) to profit from a weak holiday season for retailers.

This from Today’s Financial News:

Wall Street is in a mess today. It is all thanks to our elected officials in Washington. Yesterday, we were close to a deal. Today, we have moved backwards and investors are paying for it.

The deal is dead. Here we are one week after Bernanke and Paulson ran to Washington to beg for nearly a trillion dollars and no progress has been made. In fact, our elected officials may have succeeded in moving the whole thing backwards, making one of the most dangerous, politically charge financial emergencies in the nation’s history.

Yesterday, the equities market celebrated rumors of a finalized package. All we needed, we thought, was for McCain and Obama to gather with the president, smile, and snap a few campaign photos. It was supposed to be a done deal.

Who knew a shouting match would erupt, proposed bills would be ripped apart, and Wall Street would be hanging on for its life?

As if this financial fiasco was not nasty enough, Washington’s political pandering has decreased the chances of success exponentially. Our legislators are not thinking about what is best for you and me on Main Street. They are merely working their political campaigns, and screwing us in the process.

Instead of economic advisors shaping the deal, campaign managers are calling the shots.

Thanks to this nation’s tendency to put politicians before citizens, Wall Street looks like it is gearing up for a plunge today. Money managers across the globe took yesterday’s bullish action to shrink their portfolios and bail out while they had a chance. There will not be any buyers today unless Washington makes a move.

If you are a savvy investor looking to make some money off this action, go short. Invest in the companies looking to make the biggest drops. My favorite short position right now is with Under Armour (NYSE:UA). Earlier this week I recommended readers buy its January 30 Puts (UAMF.X). Their value has risen by over 35% already. Much bigger gains are on the way.

Today is going to be a historic day on the Street. There is no doubt the bears will start off in charge. Hopefully, Washington pulls itself into high gear and gets us out of this politically corrupt mess before too much damage is done.

One thing is for sure, Washington is not looking out for you and me.

Source: The nation’s future: Campaign managers in charge