Under Armour Inc. managed to reach more customers than expected last quarter, even with most of its stores closed -- but the road ahead is looking bumpy.
The athletic-goods maker’s second-half revenue is likely to fall 20 per cent to 25 per cent, with its recently improved gross margin coming under new pressure, executives warned on a call with analysts Friday. The volatile stock soared in premarket trading after second-quarter revenue beat estimates, but it gave up the gains after the open, falling as much as 7.3 per cent to US$10.61 in New York.
The company expects pressure on its gross margin in the second half of the year, and might not have enough inventory if sales recover faster than expected, executives said on the call.
That would be a comedown from a second quarter in which Under Armour’s gross margin rose to 49.3 per cent from 46.5 per cent a year earlier. The company cited fewer off-price sales and more direct-to-consumer transactions as homebound shoppers ordered online.
Second-quarter revenue fell 41 per cent from a year earlier to US$707.6 million, but that handily topped the highest estimate of US$596 million, according to a Bloomberg survey of analysts.
The company responded to the COVID-19 slowdown by “amplifying Under Armour’s connection with our consumers through innovative digital activations” and “proactively managing our cost structure,” Chief Executive Officer Patrik Frisk said in a statement.
The Baltimore-based company didn’t address the notices that founder Kevin Plank and Chief Financial Officer David Bergman received from the U.S. Securities and Exchange Commission last week, naming the two in a probe of the company’s accounting.