The interior of an Under Armor store is seen on November 3, 2021 in Houston, Texas.
Brandon Bell | Getty Images
Under armour said Thursday that sales in the holiday quarter slowed, but its earnings beat estimates as the athletic apparel retailer worked to rein in costs.
Weak demand in North America and a slowdown in wholesale orders led revenue to decline 6% during the period, but the company reported big gains in its gross margin.
Under Armor now expects full-year sales to decline slightly more than previously expected. Even so, it raised its expectations for full-year gross margin and earnings with just weeks left in the fiscal year.
Shares rose about 6% in premarket trading.
Here’s how Under Armor performed in its fiscal third quarter compared to what Wall Street expected, based on a survey conducted by analysts at LSEG, formerly known as Refinitiv:
- Earnings per share: 19 cents adjusted versus 11 cents expected
- Revenue: $1.49 billion versus $1.50 billion expected
The company’s reported net income for the three-month period ended Dec. 31 was $114.1 million, or 26 cents per share, compared to $121.6 million, or 27 cents per share, in the last year. Excluding one-time items related to the sale of its MyFitnessPal platform, tax impacts and litigation reserves, Under Armour’s adjusted net income was about $84 million, or 19 cents per share.
For the full fiscal year, which is expected to end at the end of March, Under Armor expects sales to decline 3% to 4%, compared to its previous forecast of a 2% to 4% decline. Wall Street had expected sales to decline 2.8%, according to LSEG.
The retailer expects to earn earnings per share of 57 cents to 59 cents, compared with the previous range of 47 cents to 51 cents. It is expected to post adjusted earnings per share of between 50 cents and 52 cents.
According to LSEG, Wall Street had expected earnings of 49 cents per share.
During the quarter, Under Armor saw its gross margin jump 1 percentage point to 45.2%, driven by lower transportation expenses and partially offset by increased promotions and sales to off-price channels. For the full year, the company now expects its gross margin to increase 1.2-1.3 percentage points, compared to a previous expectation of 1-1.25 percentage points.
“Despite a mixed retail environment during the holiday season, our third quarter revenue results were in line with our expectations; we were able to deliver better-than-expected profitability and remain on track to achieve our outlook for the full year,” said Stephanie Linnartz, CEO of Under Armour. she said in a statement. “As we close out fiscal 2024 and our strengthened leadership team begins to pick up pace in the quarters ahead, we are working to return Under Armor to a path of improved revenue growth and greater value creation in the future.”
During the quarter, Under Armour’s wholesale revenue, which accounts for about 60% of sales, fell 13% to $712 million. Partners like it Dick’s Sporting Goods, Kohl’s AND JD Sports have pulled orders as they grapple with their own demand and inventory challenges. It’s a theme that runs throughout the apparel industry as wholesalers look to tighten their order books in an uncertain economy.
Like its peers, Under Armor has been working to expand sales directly to consumers through its stores and website. During the quarter, Under Armor saw direct sales increase 4% to $741 million, led by a 5% increase in store revenue and a 2% increase in digital sales.
Read the full earnings release here.