Wells Fargo is taking a step back on Under Armour . The bank downgraded shares of the athletic clothing company to equal weight from overweight Friday. It also lowered its price target to $8 per share from $12, implying nearly 9% upside from Thursday’s close. Analyst Will Gaetner pointed out three primary headwinds hitting Under Armour: an overexposure to North American wholesale, lofty excess inventory and a new chief executive only six months into her tenure. “We expect the NA wholesale channel to remain difficult at least through the end of ’23, which will likely continue to be a drag on [revenue] growth,” Gaetner said. “Retailers remain cautious with orders, as headwinds (inflationary pressures, lower gov’t subsidies) continue to weigh on demand.” Gaetner added that the North American wholesale market makes up more than half of Under Armour’s revenue and expects a decline of 2.2% to revenue growth in 2024. He added that high inventory will pressure gross margins, while newly minted chief executive Stephanie Linnartz will need more time to turn the company around. “We credit Linnartz for recognizing the challenges & outlining ways to course correct,” he said. “However, we believe the changes that she spoke to including improving product flow, innovation, segmentation, will take time to bear fruit.” Under Armour has slumped more than 27% year to date. UA YTD mountain Under Armour stock ahs slipped more than 27% from January. — CNBC’s Michael Bloom contributed to this report.
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