Under Armor on Thursday said sales were falling across its businesses, but the sportswear retailer posted better-than-expected first-quarter financial results, sending its stock soaring in early trading.
The company beat Wall Street expectations on the top and bottom lines. Its shares rose more than 20% in intraday trading on Thursday.
Here’s how the sportswear company did in its fiscal first quarter compared to what Wall Street expected, based on a survey of analysts from LSEG:
- Earnings per share: 1 cent adjusted versus a loss of 8 cents expected
- Income: $1.18 billion vs. $1.15 billion expected
In the quarter ended June 30, Under Armor reported a loss of $305.4 million, or 70 cents per share, compared with a profit of $10 million, or 2 cents per share, a year earlier. Excluding one-time charges, it reported a profit of $4 million, or 1 cent per share.
Sales fell to $1.18 billion, down about 10% from $1.32 billion a year earlier.
In late June, Under Armor agreed to settle a one-year securities lawsuit for $434 million about three weeks before a trial was scheduled to begin. In 2017, Under Armor was accused of misleading shareholders about its revenue growth in an effort to meet Wall Street forecasts.
In a press release, the company said it did not admit fault or wrongdoing, but agreed to drop the case – some seven years after it was filed – due to “the costs and risks inherent in litigation.” Under Armor said it will pay the settlement using cash from its revolving credit facility.
The company now expects to turn to a loss in fiscal 2025. It projects losses per share to range between 53 cents and 56 cents and adjusted earnings per share between 19 cents and 22 cents.
Under Armor previously expected full-year earnings of 2 cents to 5 cents per share and adjusted earnings of between 18 cents and 21 cents per share.
The sportswear company is in the midst of a wider restructuring plan as it struggles to regain relevance, reverse declining sales and boost profits. Earlier this year, Under Armor said it would lay off an undisclosed number of employees, cut promotions and sales and streamline its lineup to be more competitive. Also looking to remove a page by Nike playbook and position Under Armor as a premium brand.
The restructuring came two months after the previous one Marriott Executive Stephanie Linnartz has been ousted as CEO of Under Armour, and founder Kevin Plank is back at the helm once again.
In a statement Thursday, Plank said the company is “encouraged by early progress” in its efforts. While sales were still down at Under Armor’s operations during the quarter, results were better than expected.
In North America, Under Armour’s biggest market, sales fell 14 percent to $709 million, but were higher than the $669.1 million analysts had expected, according to StreetAccount. Wholesale revenue fell 8% to $681 million, while direct-to-consumer sales fell 12% to $480 million.
Sales at Under Armor owned and operated stores fell 3%, while online sales fell 25% — a decline the company attributed to “planned reductions in promotional activities.”
Apparel revenue was down 8%, footwear sales were down 15% and accessories revenue was down 5%.
While Under Armour’s customers adjust to fewer offers, a slowdown in discounting boosted margins during the quarter. The company’s gross margin rose 1.1 percentage points to 47.5 percent, better than the 46.1 percent analysts expected, according to StreetAccount.
As Under Armor looks to return to growth and position itself as a premium retailer in a crowded sportswear space, it’s adding fresh talent and expanding into sustainable fashion.
On Tuesday, the retailer announced that it has acquired sustainable fashion brand Unless Uncollective and will bring the brand’s founder, former Adidas exec Eric Liedtke, as executive vice president of brand strategy.
“Eric will be globally responsible for strengthening Under Armour’s brand identity and narrative, the comprehensive strategic planning process and executing transformational initiatives that accelerate UA’s growth while continuing to lead and curate UNLESS,” said a press release about the acquisition.
“He will report to President and CEO Kevin Plank and oversee UA’s brand presence across category marketing, consumer intelligence, creative, marketing operations, engagement, social media, sports marketing and all of strategy functions”, the announcement states.
Unless it bills itself as “the world’s first all-plant, zero-plastic regenerative fashion brand” and said it was created to prove that plants could replace plastics in clothing and footwear.
In a research note Thursday, William Blair analysts warned that while Under Armour’s first-quarter results were “better than we feared,” it will take time for the brand to return to growth.
“While the goal of returning the brand to a more premium position by narrowing the focus on core sizes could prove to be an important catalyst in the long term, the reality is that it will take time to roll out with the impact of a critical mass new product not expected until second half of fiscal 2026,” the analysts wrote in the note.
“Risks include Under Armour’s ability to maintain and grow a strong brand image and product portfolio in a highly competitive industry, historically high rates of senior management turnover and the majority control held by CEO Kevin Plank.”
Read the full earnings release here.
