Under Armour’s stock jumps 7% as profit beat offsets a revenue miss

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Under Armour Inc.’s stock rose 7% early Thursday, after the sporting apparel company beat profit estimates for its fiscal third quarter to offset revenue that came up short.

The Baltimore-based company
had net income of $114.1 million, or 26 cents a share, for the quarter, compared with $121.6 million, or 27 cents a share, in the year-earlier period.

Adjusted per-share earnings came to 19 cents, ahead of the 11-cent FactSet consensus.

Revenue fell to $1.486 billion from $1.582 billion a year ago, below the $1.503 billion FactSet consensus.

“Despite a mixed retail environment during the holiday season, our third quarter revenue results were in line with our expectations; we were able to deliver better than anticipated profitability and remain on track to achieve our full-year outlook,” said CEO Stephanie Linnartz in a statement.

Wholesale revenue fell 13% to $712 million, while direct-to-consumer revenue rose 4% to $741 million.

In its fiscal second quarter, Linnartz said inflation and subdued consumer confidence, still-high inventory levels and broad promotions were creating pressure in the wholesale business and softness in the company’s future-orders book.

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By geography, North America revenue fell 12% to $915 million in the quarter, while international revenue rose 7% to $566 million. International growth was driven by a 7% increase in EMEA, a 7% increase in Asia-Pacific and a 9% increase in Latin America.

By category, apparel revenue fell 6% to $1 billion and footwear revenue was down 7% to $331 million. Revenue from accessories was flat at $105 million.

Gross margin expanded by 100 basis points to 45.2%, driven by supply chain benefits stemming from lower freight costs. Those were partially offset by inventory management actions, including a higher percentage of sales from the off-price channel and increased promotion in the DTC business.

The company tweaked its 2024 guidance and now expects revenue to be down 3% to 4%, narrower than prior guidance of down 2% to 4%.

It expects EPS of 57 cents to 59 cents and adjusted EPS of 50 cents to 52 cents.

The FactSet consensus is for EPS of 49 cents and for revenue to fall 2.9%.

Gross margin is expected to gain 120 basis points to 130 basis points, up from prior guidance of 100 basis points to 125 basis points.

The stock has fallen 24% in the last 12 months, while the S&P 500
has gained 21%.

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