Under Armour raised its guidance and now expects a net profit for 2021 after reporting first-quarter results that topped Wall Street’s targets. Sales in the first quarter rose 35 percent.
“Under Armour is off to an excellent start for the year. Our first-quarter results demonstrate that our improved operating model and investments we’re making to amplify our connection with consumers are enabling us to deliver against strong demand for our brand,” said Under Armour President and CEO Patrik Frisk. “Additionally, with a solid balance sheet and well-managed inventory, we’re confident in our ability to drive well through 2021 as we get back on offense and make measured progress to returning to sustainable, profitable growth over the long-term.”
First Quarter 2021 Review
- Revenue was up 35 percent to $1.26 billion (up 32 percent currency-neutral) compared to the prior year. Results topped Wall Street’s consensus estimate of $1.131 billion;
- Wholesale revenue increased 35 percent to $800 million and direct-to-consumer revenue increased 54 percent to $437 million, driven by 69 percent growth in eCommerce;
- North America revenue increased 32 percent to $806 million and international revenue increased 58 percent to $452 million (up 50 percent currency-neutral). Within the international business, revenue increased 41 percent in EMEA (up 33 percent currency-neutral), increased 120 percent in Asia-Pacific (up 107 percent currency-neutral), and decreased 9 percent in Latin America (down 7 percent currency-neutral);
- Apparel revenue increased 35 percent to $810 million. Footwear revenue increased 47 percent to $309 million. Accessories revenue increased 73 percent to $117 million;
- Gross margin increased 370 basis points to 50.0 percent compared to the prior year, driven primarily by benefits from pricing, supply chain initiatives, and channel mix;
- Selling, general & administrative expenses decreased 7 percent to $515 million primarily due to lower legal and marketing costs than the prior year;
- Restructuring and impairment charges were $7 million;
- Operating income was $107 million. Adjusted operating income was $114 million;
- Net income was $78 million. Adjusted net income was $75 million. In the year-ago period, Under Armour reported a loss of $589.7 million, or $1.30 a share;
- Diluted earnings per share were 17 cents a share. Adjusted diluted earnings per share were 16 cents. Wall Street’s consensus estimate on an adjusted basis was 4 cents;
- Inventory was down 9 percent to $852 million; and
- Cash and Cash Equivalents was $1.3 billion at the end of the quarter, and no borrowings were outstanding under the company’s $1.1 billion revolving credit facility.
Updated 2021 Outlook
Key points related to Under Armour’s full-year 2021 outlook include:
- Revenue is now expected to be up at a high-teen percentage rate compared to the previous expectation of a high-single-digit percentage rate increase, reflecting a high-teen percentage growth rate in North America and low thirties percentage growth rate in the international business;
- Gross margin is now expected to be up approximately 50 basis points compared to the previous expectation of ‘up slightly,’ versus the prior-year adjusted gross margin of 48.6 percent with benefits from pricing and supply chain efficiency, being largely offset by the sale of MyFitnessPal, which carried a high gross margin rate;
- Operating income is now expected to reach approximately $105 million to $115 million compared to the previous range of $5 million to $25 million. Excluding the impact of restructuring efforts, adjusted operating income is expected to reach $230 million to $240 million compared to the previous expectation of $130 million to $150 million; and
- Diluted loss per share is now expected to be about 2 cents to 4 cents compared to the previous expectation of a diluted loss per share of 18 cents to 20 cents and adjusted diluted earnings per share is expected to be in the range of 28 cents to 30 cents compared to the previous expectation of adjusted diluted earnings per share in the range of 12 cents to 14 cents.
2020 Restructuring Plan
In April 2020, Under Armour announced a restructuring plan designed to rebalance its cost base to improve profitability and cash flow. Of the estimated $550 million to $600 million restructuring plan range, the company has recognized $480 million of pre-tax charges, including $7 million in the first quarter of 2021. Of the $480 million recognized, there has been $126 million in cash-related charges and $354 million in non-cash-related charges. The company expects to realize approximately $35 million to $40 million in charges related to this plan in the second quarter.
Under Armour said it remains focused on protecting employees and consumer health and safety while working with its suppliers, partners and customers to navigate potential disruptions. Given continued uncertainty related to COVID-19, there could be potential material impacts on its full-year business results in 2021.
Photo courtesy Under Armour