Under Armour shares soar as earnings beat prompts retailer to hike annual outlook

Under Armour shares soared in premarket trading Tuesday as strong fiscal third-quarter earnings revealed the athletic apparel maker is seeing progress in improving its brand image under CEO Patrik Frisk.

With heightened demand for its sneakers and sweat-wicking clothing, Under Armour said it now anticipates sales will rise 25% from 2020, topping its prior outlook.

Frisk has been trying to improve Under Armour’s image by increasing marketing spending and pulling inventory out of discount channels in order to sell more at full price.

The company’s stock was recently up around 11%.

Here’s how Under Armour did compared with what analysts polled by Refinitiv were expecting:

• Earnings per share: 31 cents adjusted vs. 15 cents expected
• Revenue: $1.55 billion vs. $1.48 billion expected

Net income for the three-month period ended Sept. 30 rose to $113.4 million, or 24 cents per share, compared with $38.9 million, or 9 cents a share, a year earlier.

Excluding restructuring charges of $17 million, Under Armour earned 31 cents per share, more than double the 15 cents per share that analysts expected.

In April 2020, Frisk announced a $550 million to $600 million restructuring plan. The company now expects it will tally $525 million to $575 million in charges as it looks to cut costs by the end of its fiscal first quarter.

Revenue rose 8% to $1.55 billion from $1.43 billion a year earlier. Analysts had anticipated sales of $1.48 billion.

Wholesale revenue rose 10% while direct-to-consumer sales were up 12%. Under Armour still derives more sales from wholesale partners, like department stores, but the company has been investing in its own stores and website to in a bid to bypass middlemen and sell more directly to customers.

Online sales were down 4% from the prior year, as pandemic-fueled e-commerce activity slowed. The company said digital sales made up 33% of total sales, down from 39% in the prior period.

Sales in North America, its biggest market, were up 8% while international revenue was up 18%. Within Under Armour’s international segment, sales were up 19% in Asia-Pacific, up 15% in its Europe, Middle East and Africa division, and up 27% in Latin America.

The results are the latest sign that its pursuit of more profitable sales is on track. Frisk has been at the helm since Jan. 1 2020, when he was tasked with reversing a sales slump. In a competitive landscape, Under Armour was losing share to rivals like Nike and Lululemon.

“They’ve spent the pandemic focusing on getting healthier rather than bigger, and the margins are speaking for themselves,” said BMO Capital Markets analyst Simeon Siegel.

While other retailers have been hurt by factory shutdowns in Vietnam, an apparel manufacturing hub, Under Armour didn’t raise any concerns about supply chain difficulties. About one-third of its apparel and accessories are made in Vietnam.

For fiscal 2021, Under Armour said earnings per share will reach about 74 cents, on an adjusted basis, compared with its prior estimate of 50 cents to 52 cents.

Revenue is estimated to rise about 25%, compared with its previous forecast for an increase in the low twenties.

Analysts had been forecasting Under Armour to earn 55 cents per share, on an adjusted basis, on sales of $5.5 billion.

Under Armour shares are up about 28% year to date, as of Monday’s market close. The company has a market cap of $10.3 billion.

Find the full earnings press release from Under Armour here.