Under Armour Inc. is rebuilding momentum in its home market.
North American sales grew for the first time in a year, helping drive revenue at the athleticwear maker that topped analysts’ estimates last quarter. That sent the shares up as much as 7.4 per cent in premarket trading Thursday.
The rebound in North America, which accounts for about three-quarters of revenue, signals that Under Armour’s recent transition is starting to pay off. In the past year, which Chief Executive Officer Kevin Plank has called one of the most challenging for Under Armour, the company dramatically reduced its product offerings and invested in getting goods to the market faster.
Gains in footwear and apparel spurred sales in the second quarter, along with 28 per cent growth in its international business.
Though Under Armour’s stock remains well below its all-time high of US$53.78 in 2015, it has regained some ground. The shares climbed as high as US$22.64 in premarket trading and have soared 46 percent this year through Wednesday’s close.
The Baltimore-based company’s results continue a general upswing in the U.S. shoe and sports apparel world. Nike Inc. jumped after its most recent earnings, largely a result of the company getting its domestic business back on track.
Under Armour relies more heavily on its North American sales than most of its rivals. Nike Inc., by comparison, gets about 44 per cent of revenue from the region, and Adidas AG gets about 21 per cent.
Revenue rose to US$1.17 billion in the second quarter, compared with the US$1.15 billion average of analysts’ estimates. Excluding some items, the loss per share amounted to 8 cents. Analysts had projected a loss of 8.5 cents.
Under Armour’s transformation has seen reduced spending in areas like million-dollar endorsement deals and licensing agreements, and an elimination of about 40 per cent of products to focus on its highest-selling lines. The goal is to reverse a two-year slump that has come amid stiffening domestic competition from companies like Adidas, and changing consumer preferences toward casual looks and away from performance gear.
Executives see the second half of the year as a critical period for evaluating the company’s new direction. As inventory overhead shrinks and new products and production come on line, investors will get a clearer picture of whether the restructuring is working.
Under Armour has said it expects profitability to increase as excess inventory comes off the books. Still, it said Thursday that gross margin for the full year would be flat or slightly down from the prior year’s 45 percent.
Advertisement