Message Font: Serif | Sans-Serif
No. of Recommendations: 2
Over the last six quarters or so, UA’s operating metrics have been steadily deteriorating, from top line to bottom line.

Sales: peaked at $466MM in Q2 ‘11, serially declined to $370MM in Q2 ‘12

Sales growth: similarly peaked at 42% in Q2 ‘11, steadily declined to 27% in Q2 ‘12

Gross margin: peaked at 51.6% in Q4 ‘11, down to 45.9% in Q2 ‘12, below the 46.4% in Q1 ‘11

SG&A: Since the sharp drop to 32.2% in Q3 ‘11, is back up more than 10 points to 42.7% in Q2 ‘12

Operating margin: Down to a poor 3.2% from a high of 16.1% in Q3 ‘11

Net margin: Down to an anemic 2.9% from a 9.9% high in Q3 ‘11

For a growth company, SG&A investment has to be justified by growth that is accelerating, not decelerating. After all, the whole point is to is to generate incremental operating leverage, which drives margin improvement.

Taking Q1 ‘11 as a baseline, Gross margin is down 0.5 points, SG&A is up 3.1 points, Operating margin is down 3.5 points, net profit is down 1 point.
IOW, most of the damage to profitability is being caused by SG&A out of control just as sales growth is slowing.

If this negative trend isn’t quickly reversed, the stock’s trajectory will be.
MDP Home Fool
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.