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.
Under Armour Rises Most Since October as Earnings Top Estimates

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.
Under Armour Rises Most Since October as Earnings Top Estimates

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  • Read the statement.
  • See Wall Street estimates.

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