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May 4, 2021

Under Armour sees lower profitability, higher sales ahead

Canadian market is ready for another athletic wear brand: Athleta CEO

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Under Armour Inc. reported first-quarter results that beat analysts’ estimates and sharply boosted its full-year outlook as stimulus checks, the return of team sports and high demand for sportswear buoy sales. However, the shares fell after the company said it expects lower gross margin in the current quarter.

  • The company now expects earnings per share, excluding some items, to be between 28 cents and 30 cents this year, more than double the earlier estimated range of 12 cents to 14 cents. Revenue is now expected to rise by a high-teens percentage, better than the high-single-digit percentage increase it had been forecasting earlier.

Key insights

  • Revenue rose 35 per cent from a year ago to US$1.26 billion for the quarter ended March 31 as the athletic-wear company looks to recover from the slump it faced a year ago amid the onset of the pandemic. A 69 per cent bump in online sales helped fuel that growth.
  • In a call with analysts, Under Armour executives said the company sees its gross margin falling by 120 to 140 basis points in the second quarter, citing the absence of an exercise app, higher freight expenses and more discounts in the wholesale channel.
  • Chief Executive Officer Patrik Frisk has been cutting costs as part of a sweeping restructuring effort, seeking higher cash flow and profitability. The company took US$7 million in charges related to the overhaul last quarter and has recognized US$480 million of total pretax charges thus far, it said Tuesday.
  • Under Armour’s Asia-Pacific sales rose 107 per cent, excluding currency swings, while its home market of North America saw revenue climb 32 per cent. One weak spot was Latin America -- parts of which are in the midst of another virus wave.

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Market reaction

  • Under Armour shares fell 1.3 per cent at 9:50 a.m. in New York on Tuesday. The stock had advanced 41 per cent this year through Monday’s close.