Under Armour on Thursday said sales are falling across its business, but the athletic apparel retailer posted better fiscal first quarter results than feared, sending its stock surging in early trading.
The company beat Wall Street’s expectations on the top and bottom lines. Shares opened about 17% higher.
Here’s how the athletic apparel company did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: 1 cent adjusted vs. a loss of 8 cents expected
- Revenue: $1.18 billion vs. $1.15 billion expected
In the three months ended June 30, Under Armour reported a loss of $305.4 million, or 70 cents per share, compared with a profit of $10 million, or 2 cents per share, a year earlier. Excluding one-time expenses, it reported a profit of $4 million, or 1 cent per share.
Sales dropped to $1.18 billion, down about 10% from $1.32 billion a year earlier.
In late June, Under Armour agreed to settle a years-old securities lawsuit for $434 million about three weeks before a trial was slated to begin. In 2017, Under Armour was accused of defrauding shareholders about its revenue growth in a bid to meet Wall Street’s forecasts.
In a press release, the company said it was not admitting fault or wrongdoing but had agreed to end the case – about seven years after it was filed – because of “the costs and risks inherent in litigation.” Under Armour said it would pay the settlement using cash from its revolving credit facility.
The company now expects to swing to a loss in fiscal 2025. It’s forecasting losses per share to be between 53 cents and 56 cents and adjusted earnings per share to be between 19 cents and 22 cents.
Under Armour previously expected full-year earnings of 2 cents to 5 cents per share, and adjusted earnings between 18 cents and 21 cents per share.
The athletic apparel company is in the midst of a broad restructuring plan as it fights to regain relevance, reverse a sales slump and boost profits. Earlier this year, Under Armour said it would lay off an unknown number of workers, cut back promotions and discounts and streamline its assortment to be more competitive. It’s also looking to take a page out of Nike’s playbook and position Under Armour as a premium brand.
The restructuring came two months after former Marriott executive Stephanie Linnartz was ousted as Under Armour’s CEO and its founder Kevin Plank returned to the helm once again.
In a statement on Thursday, Plank said the company is “encouraged by early progress” in its efforts. While sales still tumbled across Under Armour’s business during the quarter, results came in better than expected.
In North America, Under Armour’s largest market, sales dropped 14% to $709 million, but were higher than the $669.1 million that analysts had expected, according to StreetAccount. Wholesale revenue dropped 8% to $681 million, while direct-to-consumer sales declined 12% to $480 million.
Sales at stores owned and operated by Under Armour fell 3%, while online sales plunged a staggering 25% — a drop off the company attributed to “planned decreases in promotion activities.”
Apparel revenue fell 8%, footwear sales dropped 15% and accessories revenue slid 5%.
While Under Armour’s customers are adjusting to fewer promotions, the slowdown in discounting boosted margins during the quarter. The company’s gross margin rose 1.1 percentage points to 47.5%, better than the 46.1% that analysts had expected, according to StreetAccount.
As Under Armour looks to get back to growth and position itself as a premium retailer in a crowded athletic apparel space, it’s adding fresh talent and expanding into sustainable fashion.
On Tuesday, the retailer announced it had acquired sustainable fashion brand Unless Collective and will bring on the brand’s founder, former Adidas-exec Eric Liedtke, as executive vice president of brand strategy.
“Eric will … be globally accountable for amplifying Under Armour’s brand identity and storytelling, its comprehensive strategic planning process, and executing transformational initiatives that accelerate growth for UA while continuing to lead and curate, UNLESS,” a press release about the acquisition said.
“He will report to President & CEO Kevin Plank and oversee UA’s brand presence through category marketing, consumer intelligence, creative, marketing operations, loyalty, social media, sports marketing, and all strategy functions,” the release said.
Unless bills itself as “the world’s first all-plant, zero-plastic regenerative fashion brand” and said it was created to prove that plants could replace plastics in the manufacturing of apparel and footwear.
In a research note Thursday, William Blair analysts cautioned that while Under Armour’s first quarter results were “better than feared,” it will take time for the brand to get back to growth.
“While the goal of resetting the brand to a more premium positioning while narrowing the focus to core fundamentals could prove to be a meaningful catalyst over the longer term, the reality is that this will take time to unfold with the impact of a critical mass of new product not expected until the second half of fiscal 2026,” the analysts wrote in the note.
“Risks include Under Armour’s ability to maintain and evolve a strong brand image and product portfolio in an industry with intense competition, historically high turnover rates in senior management, and majority voting control held by CEO Kevin Plank.”
Read the full earnings release here.