Under Armour Rises Most Since October as Earnings Top Estimates

(Bloomberg) -- Under Armour Inc. rose the most in more than six months as its first-quarter earnings beat analysts’ estimates, another indication that its three-year transformation is getting the athletic brand back on track.

• Earnings amounted to 5 cents a share, Under Armour said on Thursday, compared with estimates of break-even. Sales were $1.2 billion, just a slight gain from a year earlier, but above the projected $1.18 billion.

Key Insights

• The slow sales growth (and 2.8 percent dip in North American sales) was intentional, part a dramatic shift in Under Armour’s business over the past two years. The company wrote down a large chunk of inventory, reworked its supply chain and eliminated about 40 percent of its products to focus on its highest-selling lines.
• Gross margin expanded for the third consecutive quarter, an indication that the company is becoming more efficient and that those changes are helping it sell more items at full price.
• Inventory also declined dramatically, in line with founder Kevin Plank’s strategy to create a more streamlined operation. Under Armour’s $875 million in inventory was its lowest level in three years.
• The focus for Under Armour now shifts to growth later in the year, especially in its all-important domestic market. The company kept its full-year revenue growth projections in the 3 percent to 4 percent range, but boosted its full-year earnings forecast.

Market Reaction

• Under Armour shares rose as much as 9.4 percent, the most since Oct. 30, to $24.10 in New York trading. That’s the highest level in almost five months. The stock has risen 33 percent this calendar year.

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• Read the statement.
• See Wall Street estimates.

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