Under Armour The company on Thursday reported declining sales across its businesses, but the sports apparel retailer reported better-than-expected first-quarter results, sending its shares soaring in early trading.
The company beat Wall Street expectations on sales and profits, and its shares rose more than 20% in trading on Thursday.
Based on LSEG’s analyst survey, the sports apparel company’s first-quarter results compared with Wall Street expectations:
Earnings per share: Adjusted 1 cent (expected loss of 8 cents)Revenue: Expected $1.15 billion (expected $1.18 billion)
Under Armour reported a loss of $305.4 million, or 70 cents a share, for the three months ended June 30. This compares with a profit of $10 million, or 2 cents a share, in the same period a year ago. Excluding one-time costs, profit was $4 million, or 1 cent a share.
Revenue fell about 10% to $1.18 billion from $1.32 billion in the same period last year.
In late June, about three weeks before the trial was scheduled to begin, Under Armour agreed to settle a securities lawsuit that was finalized a year ago for $434 million. In 2017, Under Armour was accused of misleading shareholders about its revenue growth in order to meet Wall Street expectations.
The company said in a press release that it is not admitting any negligence or wrongdoing, but that it agreed to end the litigation nearly seven years after it was filed because of “the inherent costs and risks of litigation.” Under Armour said it will pay the settlement with cash from its revolving credit facility.
The company now expects to turn a loss in fiscal 2025. It now sees a loss per share of 53 cents to 56 cents, and adjusted earnings per share of 19 cents to 22 cents.
Under Armour had previously expected full-year earnings to be between 2 cents and 5 cents per share, and adjusted earnings to be between 18 cents and 21 cents per share.
Sports apparel maker Under Armour is undergoing a wide-ranging restructuring plan to regain its presence, reverse sagging sales and boost profits. Earlier this year, Under Armour said it would lay off an unspecified number of employees, cut promotions and discounts and streamline its product assortment to be more competitive. Nike Create a playbook and position Under Armour as a premium brand.
This reorganization is Marriott Under Armour has fired executive Stephanie Linnartz as CEO and replaced founder Kevin Plank with the company’s CEO.
Plank said in a statement Thursday that the company is “encouraged by the initial progress” on the effort. Sales across Under Armour’s businesses remained weak during the quarter, but results beat expectations.
In North America, Under Armour’s largest market, sales fell 14% to $709 million but beat analysts’ expectations of $669.1 million, according to Street accounts. Wholesale sales fell 8% to $681 million and direct-to-consumer sales fell 12% to $480 million.
Sales at Under Armour-owned and operated stores fell 3% and online sales tumbled a staggering 25%, which the company attributed to “planned reductions in promotional activity.”
Apparel revenue fell 8%, footwear sales fell 15% and accessories revenue fell 5%.
While Under Armour customers are adjusting to fewer promotions, a slowdown in discounting helped boost margins during the quarter. The company’s gross margin rose 1.1 percentage points to 47.5%, beating analysts’ expectations of 46.1%, according to Street accounts.
Under Armour is adding new talent and expanding into sustainable fashion as it seeks to grow again and establish itself as a luxury retailer in the competitive sports apparel industry.
On Tuesday, the retailer acquired sustainable fashion brand Unless Collective, signing the company’s founder and former Adidas The company appointed executive Eric Liedtke as executive vice president of brand strategy.
“Eric will be responsible globally for and will continue to lead and curate Under Armour’s brand identity and storytelling, the expansion of the comprehensive strategic planning process and the execution of transformation initiatives to accelerate Under Armour’s growth,” a press release about the acquisition stated.
“He will report to president and CEO Kevin Plank and will oversee UA’s brand presence across category marketing, consumer intelligence, creative, marketing operations, loyalty, social media, sports marketing and all strategic functions,” the release said.
Unleas calls itself “the world’s first all-plant, zero-plastic regenerative fashion brand,” and says it was founded to prove that plants can replace plastic in the production of apparel and shoes.
Analysts at William Blair & Co. said in a research note on Thursday that Under Armour’s first-quarter results were “better than feared,” but warned that it will take time for the brand to get back on track for growth.
“The goal of repositioning the brand more premium while focusing on core fundamentals could be a meaningful catalyst in the longer term, but the reality is that this will take time to materialize as a critical mass impact from new products is not expected until H2FY26,” the analysts wrote in a note.
“Risks include Under Armour’s ability to maintain and grow its strong brand image and product portfolio in a highly competitive industry, historically high turnover among senior management and CEO Kevin Plank’s continued control of majority voting control.”
Read the full earnings announcement here.
