Under Armour said on Thursday that sales were declining across the corporate, however the sportswear retailer reported better-than-feared first-quarter results, resulting in a pointy rise in share prices in early trading.
The company exceeded Wall Street’s expectations for sales and profits. Shares opened up around 17 percent.
Here’s how the sportswear company performed in its first fiscal quarter in comparison with Wall Street expectations (based on an analyst survey conducted by LSEG):
- Earnings per share: 1 cent adjusted vs. expected lack of 8 cents
- Revenue: $1.18 billion versus expected $1.15 billion
For the three months ended June 30, Under Armour reported a lack of $305.4 million, or 70 cents per share, compared with a profit of $10 million, or 2 cents per share, a 12 months earlier. Excluding one-time items, profit was $4 million, or 1 cent per share.
Revenue fell to $1.18 billion, down about 10% from $1.32 billion a 12 months ago.
In late June, Under Armour agreed to a $434 million settlement in a years-long securities lawsuit about three weeks before the trial was set to start. In 2017, Under Armour was accused of defrauding its shareholders about its sales growth as a way to meet Wall Street forecasts.
In a press release, the corporate said it admitted no guilt or wrongdoing but agreed to drop the case – about seven years after it was filed – because of the “costs and risks associated with litigation.” Under Armour said it could pay the settlement with money from its revolving credit facility.
The company now expects to be loss-making in fiscal 2025. It forecasts a loss per share between 53 and 56 cents and adjusted earnings per share between 19 and 22 cents.
Under Armour had previously expected annual earnings of two to five cents per share and adjusted earnings between 18 and 21 cents per share.
The sportswear company is within the midst of a serious restructuring plan to regain its relevance, reverse a sales slump and increase its profits. Earlier this 12 months, Under Armour announced it could lay off an unknown variety of employees, reduce special offers and discounts and streamline its product range to be more competitive. The company also desires to follow the instance of Nike Playbook and positioning of Under Armour as a premium brand.
The restructuring took place two months after the Marriott CEO Stephanie Linnartz was removed as CEO of Under Armour and founder Kevin Plank returned to the highest.
In a press release Thursday, Plank said the corporate was “encouraged by the initial progress” in its efforts. While Under Armour’s sales continued to say no within the quarter, results were higher than expected.
In North America, Under Armour’s largest market, sales fell 14 percent to $709 million, but were above the $669.1 million expected by analysts, in keeping with StreetAccount. Wholesale sales fell 8 percent to $681 million, while direct sales fell 12 percent to $480 million.
Under Armour’s store sales fell three percent, while online sales fell a whopping 25 percent. The company attributed the decline to “planned reductions in promotional activities.”
Apparel sales fell 8%, footwear sales fell 15% and accessories sales fell 5%.
While Under Armour customers are bracing for fewer deals, the slowdown in discounting boosted margins within the quarter. The company’s gross margin rose 1.1 percentage points to 47.5 percent, higher than the 46.1 percent expected by analysts, StreetAccount reports.
Under Armour desires to grow again and position itself as a premium retailer within the highly competitive sportswear market, so it’s bringing in fresh talent and expanding into the world of sustainable fashion.
On Tuesday, the retailer announced that it has acquired sustainable fashion brand Unless Collective and hired the brand’s founder, former Adidas-executor Eric Liedtke, as Executive Vice President for Brand Strategy.
“Eric will be responsible … globally for amplifying Under Armour’s brand identity and storytelling, driving its comprehensive strategic planning process, and executing transformation initiatives that accelerate UA’s growth while continuing to provide leadership and direction UNLESS,” a press release concerning the acquisition said.
“He will report to President and CEO Kevin Plank and oversee UA’s brand presence through category marketing, consumer intelligence, creative, marketing operations, customer engagement, social media, sports marketing and all strategy functions,” the press release said.
Unless describes itself as “the world’s first regenerative fashion brand that is entirely plant-based and plastic-free,” and said it was founded to prove that plastic may very well be replaced with plants within the production of garments and shoes.
In a research note published on Thursday, analysts at William Blair warned that while Under Armour’s first-quarter results were “better than feared,” it could take a while for the brand to return to growth.
“While the goal of repositioning the brand more strongly in the premium segment while narrowing the focus on key metrics could prove to be a useful catalyst in the long term, the reality will take some time for this to unfold, as the impact of a critical mass of new products is not expected until the second half of fiscal 2026,” the analysts wrote within the note.
“Risks include Under Armour’s ability to maintain and develop a strong brand image and product portfolio in an industry with intense competition, historically high turnover rates in senior management and a majority voting control in the hands of CEO Kevin Plank.”
Read the total results release Here.
