Under Armour, Inc. reported second-quarter results that easily surpassed Wall Street’s estimates and significantly lifted its guidance for the year.

“We are very pleased with Under Armour’s better than expected second-quarter results, which reflect solid progress compared to both 2020 and 2019. Given the continued momentum, we’re raising our full-year outlook, which puts us on track to achieving a solid performance in 2021,” said Under Armour President and CEO Patrik Frisk. “With the critical mass of our transformation behind us and the continued improvements across product, marketing, and our financial results, I believe this year sets a robust foundation that positions us well for our next chapter of profitable growth.”

Frisk concluded, “At the halfway point of our fiscal year, I’m confident in our ability to execute our strategy by putting Focused Performers at the center of everything we do and increasing our capacity to drive consistent, profitable growth for our shareholders over the long-term.”

Second Quarter 2021 Review

  • Revenue was up 91 percent to $1.4 billion, up 85 percent currency-neutral, compared to the prior year. Wall Street’s consensus estimate had been $1.218 billion.
  • Wholesale revenue increased 157 percent to $768 million and direct-to-consumer revenue increased 52 percent to $561 million driven by strong growth in owned and operated stores offset by an 18 percent decline in eCommerce, which represented 39 percent of the total direct-to-consumer business.
  • North America revenue increased 101 percent to $905 million and international revenue increased 100 percent to $446 million, up 84 percent currency-neutral.
  • Within the international business, revenue increased 133 percent in EMEA, up 116 percent currency-neutral, increased 56 percent in Asia-Pacific, up 43 percent currency-neutral and increased 317 percent in Latin America, up 284 percent currency-neutral.
  • Apparel revenue increased 105 percent to $874 million. Footwear revenue increased 85 percent to $343 million. Accessories revenue increased 99 percent to $112 million.
  • Gross margin increased 20 basis points to 49.5 percent compared to the prior year driven primarily by benefits from pricing and changes in foreign currency offset by channel mix and the sale of the MyFitnessPal platform, which carried a higher gross margin rate.
  • Selling, general & administrative expenses increased 14 percent to $545 million primarily due to increased marketing expenses and costs associated with its owned and operated stores, which were closed most of last year’s comparable period due to the pandemic.
  • Restructuring charges were $3 million.
  • Operating income was $121 million. Adjusted operating income was $124 million.
  • Net income was $59 million. Adjusted net income was $110 million.
  • Diluted earnings per share were 13 cents. Adjusted diluted earnings per share were 24 cents. Wall Street’s consensus estimate was 24 cents.
  • Inventory was down 26 percent to $881 million.
  • 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.

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

  • Revenue is expected to be up at a low-20s percentage rate compared to the previous expectation of a high-teens percentage rate increase, reflecting a low-20s percentage growth rate in North America and a mid-30s percentage growth rate in the international business.
  • Gross margin is expected to increase 50-to-70 basis points compared to the previous expectation of an approximate 50 basis point improvement versus the prior year adjusted gross margin of 48.6 percent with expected benefits from pricing and changes in foreign currency offset by the sale of the MyFitnessPal platform and expected higher freight expenses.
  • Operating income is expected to reach $215 million to $225 million compared to the previous range of $105 million to $115 million. Excluding the impact of restructuring efforts, adjusted operating income is expected to reach $340 million to $350 million compared to the previous expectation of $230 million to $240 million.
  • Diluted earnings per share are expected to be 14 cents to 16 cents compared to the previous expectation of a diluted loss per share of 2 cents to 4 cents. Adjusted diluted earnings per share are expected to reach 50 cents to 52 cents compared to the previously expected range of 28 cents to 30 cents per share.

2020 Restructuring Plan
In April 2020, Under Armour announced a restructuring plan to rebalance its cost base to improve profitability and cash flow. Of the estimated $550 million to $600 million restructuring plan range, it has recognized $483 million of pre-tax charges, including $3 million in the second quarter of 2021, or $10 million year-to-date. Of the $483 million recognized, there has been $130 million in cash-related charges and $353 million in non-cash-related charges. Under Armour expects to recognize approximately $40 million to $50 million in charges related to this plan in the third quarter.

COVID-19 Update
Under Armour 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, particularly the ongoing and evolving impact on the company’s suppliers and logistics providers, there could be material impacts on it full-year business results in 2021.

Photo courtesy Under Armour