Under Armour Inc. strongly raised its guidance for the full year after reporting third-quarter earnings that were double Wall Street’s consensus targets. Revenues climbed 8 percent in the third quarter.

“Our third-quarter results were driven by strong demand for the Under Armour brand and our ability to execute quickly to meet the needs of our consumers and customers,” said Under Armour President and CEO Patrik Frisk. “With industry-leading innovations, increased marketing efforts to deepen our connection with Focused Performers and consistent operational discipline, we’re building greater brand affinity and are on track to deliver record revenue and earnings results in 2021.”

Third Quarter 2021 Review

  • Revenue was up 8 percent to $1.5 billion (up 6 percent currency-neutral) compared to the prior year;
  • Gross margin increased 310 basis points to 51.0 percent, driven by benefits from pricing and channel mix, offset by the absence of MyFitnessPal and supply chain headwinds;
  • Sales, general & administrative expenses increased 8 percent to $599 million;
  • Restructuring charges were $17 million;
  • Operating income was $172 million. Adjusted operating income was $189 million;
  • Net income was $113 million. Adjusted net income was $145 million;
  • Diluted earnings per share were $0.24. Adjusted diluted earnings per share were $0.31;
  • Inventory was down 21 percent to $838 million; and
  • Cash and cash equivalents were $1.3 billion at the end of the quarter, and no borrowings were outstanding under the company’s $1.1 billion revolving credit facility.

Sales of $1.5 billion were just ahead of Wall Street’s consensus target of $1.48 billion. Adjusted earnings of 31 cents topped Wall Street’s consensus target of 15 cents.

Sales By Segment

  • Wholesale revenue increased 10 percent to $911 million and direct-to-consumer revenue increased 12 percent to $604 million, driven by a strong performance in owned and operated stores offset by a 4 percent decline in eCommerce, which represented 33 percent of the total direct-to-consumer business.
  • North America revenue increased 8 percent to $1.0 billion and international revenue increased 18 percent to $510 million (up 13 percent currency neutral). Within the international business, revenue increased 19 percent in Asia-Pacific (up 13 percent currency neutral), increased 15 percent in EMEA (up 11 percent currency neutral), and increased 27 percent in Latin America (up 20 percent currency neutral).
  • Apparel revenue increased 14 percent to $1.1 billion. Footwear revenue increased 10 percent to $330 million. Accessories revenue decreased 13 percent to $126 million.

Updated 2021 Outlook
Key points related to Under Armour’s full-year 2021 outlook include:

  • Revenue is expected to be up approximately 25 percent compared to the previous expectation of a low-20s percentage increase, reflecting a high-20s percentage growth rate in North America and a mid-30s percentage growth rate in its International business;
  • Gross margin is expected to increase approximately 130 basis points compared to the previous expectation of an approximate 50-to-70 basis point improvement versus the prior year adjusted gross margin of 48.6 percent with expected benefits from pricing and changes in foreign currency partially offset by the sale of the MyFitnessPal platform and expected higher freight expenses;
  • Operating income is expected to reach approximately $425 million compared to the previous range of $215 million to $225 million. Excluding the impact of restructuring efforts, adjusted operating income is expected to reach approximately $475 million compared to the previous expectation of $340 million to $350 million; and 
  • Diluted earnings per share are expected to reach approximately $0.55 compared to the previous expectation of diluted earnings per share of $0.14 to $0.16. Adjusted diluted earnings per share are expected to reach approximately $0.74 compared to the previously expected range of $0.50 to $0.52 per share.

2020 Restructuring Plan
In April 2020, Under Armour announced a $550 million to $600 million restructuring plan to rebalance its cost base to improve profitability and cash flow. The company now expects to recognize $525 million to $575 million in charges related to this plan and has recognized $500 million of pre-tax charges, including $17 million in the third quarter of 2021 or $26 million year-to-date. Of the $500 million recognized in charges, $140 million are cash-related and $360 million are non-cash-related. The company currently expects to recognize any remaining charges related to this plan by the first calendar quarter of 2022.

COVID-19 Update
Under Armour said it “remains focused on protecting teammates and consumer health and safety while navigating the ongoing and wide-ranging disruptions resulting from the pandemic. The company continues to work with its suppliers, partners and customers to navigate these disruptions. However, given continued uncertainty related to COVID-19, particularly the ongoing and evolving impact on the company’s suppliers and logistics providers, there could be further material impacts on full-year business results in 2021, as well as future periods.”

Photo courtesy Under Armour