On The Fly: What to watch in Under Armour earnings report

Under Armour (UA) is scheduled to report results of its third fiscal quarter before the market open on Tuesday, October 25, with a conference call scheduled for 8:30 am EDT. What to watch for: 1. ATHLETIC ENVIRONMENT: Analysts and investors will listen for comments from the company on how it views the current athletic environment. Piper Jaffray analyst Erinn Murphy said in a recent note to clients that the environment is healthier today versus four months ago when management negatively preannounced. Murphy also said that the brand is likely gaining traction in Europe and Asia. 2. SPORTS AUTHORITY BANKRUPTCY IMPACT: The company may also offer comments on the impact of Sports Authority's bankruptcy. Wells Fargo analyst Tom Nikic recently said that "noise" from the Sports Authority's bankruptcy is fading while distribution expansion could lead to sales reacceleration over the next 12-18 months. The negative impact of The Sports Authority's liquidation on Under Armour should peak in Q3, Nikic said, partly because Under Armour generated the largest revenue from Sports Authority in Q3 and can probably sell products that were destined for Sports Authority to off-price retailers. In early 2017, Under Armour's headwind from Sports Authority should end completely, Nikic also said. 3. MLB DEAL: Under Armour will replace Majestic Athletic as the official, on-field uniform provider for Major League Baseball starting in the 2020 season, ESPN reported earlier this month. The deal puts rival Nike (NKE) on the sidelines, as Nike has made the under layer shirts for MLB players since 2009. While Under Armour has multiple endorsement deals with individual athletes, this is the first time Under Armour has held exclusive uniform rights for a major American sports league. Last year, Under Armour made a push to become the NBA's uniform provider starting in the 2017-2018 season, but lost out to Nike. 4. KOHL'S DISTRIBUTION DEAL: In July, Under Armour said it would expand its distribution to 1,100 Kohl's (KSS) stores in 2017. In an August note highlighted by Barron's, Citi analysts Kate McShane and Corinna Van der Ghinst said that, while Under Armour's distribution agreement with Kohl's has stoked investor concern given its foundation as a premium sports brand, they believe it was always the company's intention to expand outside of the high-end, not unlike Nike's diverse distribution strategy. 5. HIGH-END CLOTHING LINE: During September's New York Fashion Week, Under Armour debuted a high-end clothing line called Under Armour Sportswear, or UAS, targeting "ambitious millennials." The launch of the clothing line comes years after similar collections from rivals Nike, Adidas (ADDYY) and Puma. At a retail conference earlier in the month, Under Armour CFO Chip Molloy told analysts that development for the UAS line is a long-term project, explaining that "It's going to take a couple years. We firmly believe there's another whole wave of growth to come with that." The UAS line will be sold at Barneys New York and Mr Porter, in addition to Under Amour's flagship stores.