- Under Armour exceeded Wall Street’s expectations for quarterly revenue and earnings. Sales for the quarter jumped 8% to $1.4 billion, and the sports giant reported adjusted earnings per share of 18 cents, also topping analysts’ expectations.
- The company offered lower prices to drive higher sales but missed expectations on gross margin, which fell 310 basis points to 43.4% compared to the prior year. Under Armour attributed the margin decline to higher promotions, selling merchandise through off-price retail and changes in foreign currency.
- The weakest sales in the recent quarter came from North America, with stronger growth in Europe and the Asia-Pacific region. Under Armour acknowledged a legacy of excessive promotions and also plans to strengthen its brand. Inventory levels remain a factor, with a significant increase year over year. The company warned that margin pressure could continue due to higher promotions outweighing lower freight costs.
- The company appointed Stephanie Linnartz as CEO to address challenges, grow the online business, and compete with rivals in the very crowded sports apparel space. Diluted earnings per share for the first quarter are expected to range from a loss of 3 cents to a loss of 5 cents.
- Under Armour’s results may indicate challenges faced by other retailers. Pandemic-related trends, caused swings in promotion levels, from low markdowns to deep discounts. Consumers, are also under pressure from inflationary forces and are now more cautious about their discretionary spending. We do not own shares in Under Armour and are instead invested in Nike in managed portfolios and the Cratos BCI Worldwide Equity Fund.
Lee Kern