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Jan 31, 2017

S3 BLACKLIGHT: Shorts Up $400 million on Under Armour Miss

Under Armour Inc. (UA US & UAA US) reported worse than expected 4th quarter results, lowered future sales guidance and lost their CFO today. As expected, it’s A shares (UAA US) are down 25.5% and C shares (UA US) are down 21.8%. 

Total short interest for both the A shares (UAA US) and C shares (UA US) is $1.6 billion up $181 million, or 13%, this year. With Under Armour’s stock price down over 24% short sellers have made over $400 million in unrealized P\L today.

This continues over a year of strong short performance in Under Armour. Short interest averaged $1.9 billion in 2016, but shorts were covering steadily since July of 2016, with year-end short interest down 40% in the second half of the year to $1.2 billion. It cost short sellers $41 million to finance their short positions, but it was well worth it as they made $519 million net of financing expenses, or 27.4%, on their average short positions.

Short interest in 2017 climbed 10% to $1.4 billion. After paying $11 million in stock borrow costs in January, short P\L was down $17.5 million net of financing expenses, or down 1.2%, in January. Today’s gain of $412 million makes January’s new P\L net of financing $395 million, or a gain of 27% in January alone.

Under Armour was the most profitably shorted stock in the Textiles, Apparel and Luxury Goods Sector for the last thirteen months, followed by Nike (NKE) with $196 million in net of financing short profits, and VF Corp (VFC) with $181 million of profits. On the other side of the ledger, shorts were burned by Lululemon (LULU US) with an average of $1.2 billion of shorts losing $293 million net of financing over the last thirteen months. Adidas (ADS GR) was also not kind to short sellers with shorts losing $169 million in the last thirteen months.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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