Under Armour, the popular athletic apparel retailer, has experienced a surge in its shares despite a decline in sales. The company reported that its holiday-quarter sales slowed, resulting in a 6% drop in revenue due to soft demand in North America and a slowdown in wholesale orders. However, Under Armour managed to beat earnings estimates by working to control costs and increase its gross margin.
Despite expecting full-year sales to decline slightly more than previously anticipated, Under Armour raised its expectations for full-year gross margin and earnings just weeks before the end of its fiscal year. This positive outlook has contributed to a 6% increase in the company’s shares during premarket trading.
In terms of financial performance, Under Armour’s adjusted earnings per share for the third fiscal quarter were 19 cents, surpassing the expected 11 cents. However, its revenue of $1.49 billion fell slightly short of the anticipated $1.50 billion. The company’s reported net income for the period was $114.1 million, compared to $121.6 million in the previous year. Excluding one-time items, Under Armour’s adjusted net income was $84 million.
Looking ahead to the full fiscal year, Under Armour expects sales to decline by 3% to 4%, compared to its previous expectation of a 2% to 4% decline. The retailer is anticipating earnings per share of 57 cents to 59 cents, up from the previous range of 47 cents to 51 cents. The company also expects its gross margin to increase by 1.2 to 1.3 percentage points for the full year.
Under Armour’s CEO, Stephanie Linnartz, expressed optimism about the company’s performance despite the mixed retail environment during the holiday season. Linnartz stated that the company’s revenue results were in line with expectations and that they were able to deliver better than anticipated profitability. She also mentioned that Under Armour is working towards improving revenue growth and value creation in the future.
During the quarter, Under Armour faced challenges in its wholesale sector, with revenue dropping by 13% to $712 million. This was primarily due to partners like Dick’s Sporting Goods, Kohl’s, and JD Sports reducing their orders as they dealt with their own demand and inventory issues. However, the company saw a 4% increase in direct sales, driven by a 5% rise in store revenue and a 2% increase in digital sales.
Overall, Under Armour’s ability to beat earnings estimates and increase its gross margin has contributed to a surge in its shares. Despite facing challenges in the retail environment and the wholesale sector, the company remains optimistic about its future prospects and its efforts to improve revenue growth. With a focus on expanding direct sales and enhancing value creation, Under Armour is positioning itself for success in the athletic apparel market.
