Under Armour Inc reported stronger-than-expected first quarter earnings while boosting its full-year earnings guidance, as solid overseas demand offset a fall in North American sales.
“Our first quarter results demonstrate our unwavering commitment to protecting and growing our premium performance athletic brand through a disciplined go-to-market process that delivers innovative products and experiences to make athletes better,” said Under Armour Chairman and CEO Kevin Plank. “As we execute against our long-term plan, Under Armour will emerge from 2019 and our ‘Protect This House’ chapter as an even stronger brand and company.”
First Quarter 2019 Review
- Revenue was up 2 percent to $1.2 billion (up 3 percent currency neutral).
- Gross margin increased 100 basis points to 45.2 percent compared to the prior year driven by product cost improvements, regional mix and prior period restructuring charges, offset by channel mix.
- Selling, general & administrative expenses decreased 1 percent to $510 million, or 42.3 percent of revenue.
- Operating income was $35 million.
- Net income was $22 million or $0.05 earnings per share.
- Inventory decreased 24 percent to $875 million.
- Total debt was down 36 percent to $590 million.
- Cash and cash equivalents increased 2 percent to $289 million.
EPS of 5 cents a share came in ahead of Wall Street expectations for break-even results. Revenues at $1.2 billion was slightly ahead of average expectations of $1.18 billion.
Wholesale revenue increased 5 percent to $818 million and direct-to-consumer revenue was down 6 percent to $331 million, representing 27 percent of total revenue.
North America revenue decreased 2.8 percent to $843.2 million and the international business increased 12 percent to $328 million (up 17 percent currency neutral), representing 27 percent of total revenue. Within the international business, revenue was up 3.5 percent (up 9 percent currency neutral) to $134.1 million in EMEA, up 24.9 percent (up 30 percent currency neutral) to $144.3 million in Asia-Pacific, and gained 5.7 percent (up 10 percent currency neutral) to $49.2 million in Latin America.
Revenues in the Connected Fitness segment were up 4.4 percent to $30.1 million.
Apparel revenue inched up 0.7 percent to $774.6 million. Footwear revenue increased 7.6 percent to $292.5 million primarily driven by strength in the run category. Accessories revenue decreased 11,0 percent to $82,0 million primarily driven by planned lower sales of backpacks and bags related to a strategic relaunch of key product. Licensing revenues were down 17.8 percent to $21.7 million.
Updated Fiscal 2019 Outlook
- Revenue is still expected to be up approximately 3 to 4 percent reflecting relatively flat results for North America and a low double-digit percentage rate increase in the international business.
- Gross margin is now expected to increase approximately 110 to 130 basis points compared to 2018. Excluding restructuring charges from the comparable prior period, we now expect an increase of approximately 70 to 90 basis points compared to the 2018 adjusted gross margin due to ongoing supply chain initiatives and channel mix benefits. This compares to a previously expected range of 60 to 80 basis points in improvement compared to the 2018 adjusted gross margin.
- Operating income is now expected to reach $220 million to $230 million versus the previously expected range of $210 million to $230 million.
- Interest and other expense net is now expected to be approximately $35 million versus the previous expectation of $40 million.
- Effective tax rate is now expected to be at the high end of the 19 percent to 22 percent range.
- Earnings per share is now expected to be $0.33 to $0.34 versus the previously expected range of $0.31 to $0.33; and,
- Capital expenditures are expected to be approximately $210 million.
Photo courtesy Under Armour