Department store chain Kohl’s Corp. (KSS) continues to see shares beaten down by investor concerns over a struggling U.S. retail environment. Yet while Kohl’s saw net sales dip for the fifth straight quarter to $3.84 billion in the first quarter, analysts see the silver lining playing out well for sportswear maker Under Armour Inc. (UAA).
While Kohl’s saw revenues decline 3.3% over last year, the company said sales of its newly debuted Under Armour products exceeded expectations in Q1.
Analysts Bullish on New Under Armour Assortment
Jefferies analyst Randal Konik and his team indicated that Kohl’s earnings call confirmed great news for the Baltimore-based athletic apparel and footwear company, which has also seen its stock nosedive on a series of disappointing earnings results and heightened competition from Nike Inc. (NKE) and their revived German rivals Adidas and Puma. When the partnership was announced earlier this year, analysts were concerned that Under Armour’s deal with an off-brand retailer would work to further tarnish its already declining premium image. (See also: UBS: Under Armour’s Kohl’s Ploy Could Be a Flop.)
“Kohl's management commentary pointed to the brand ‘exceeding its very aggressive launch plan’ with strong sales across all categories including women's, children's, apparel, and footwear. The launch, the biggest in the company's history, helped drive strength in the overall active category, which accelerated to mid-teens growth from mid-single digits [last year]. We note that the addition of Under Amour appeared to not cannibalize other brands, as Nike saw ongoing strength, growing high-single digits during the quarter,” wrote Konik.
The Jefferies analysts indicated that management’s Q1 commentary confirmed their store checks, which also pointed to positive early reads on the new assortment. (See also: Can Under Armour Lift Kohl’s This Quarter?)