Under Armour shares surge on rosy outlook as turnaround takes hold
(Reuters) - Under Armour Inc’s (UA.N) (UAA.N) shares surged 25 percent on Tuesday after the sportswear maker beat quarterly earnings estimates and raised its full-year profit forecast as it kept costs lower and offered fewer discounts.
Under Armour has been striving to regain momentum after a tough couple of years when it lost out to bigger rivals Nike Inc (NKE.N) and Adidas AG (ADSGn.DE). Sweeping cost cuts, a simpler supply chain and fewer discounts have helped it reignite stagnating sales and profits.
Under Armour said it cut back on excess inventory of materials such as zippers and buttons by as much as 80 percent to reduce costs, and shrank its vendor base by a quarter.
“Under Armour continues to make progress on its multi-year restructuring, particularly with regards to inventory and cost reduction efforts,” Moody’s Apparel Analyst Mike Zuccaro said.
“While some challenges still remain, the company is stabilizing and is better positioned for improvement in 2019.”
Gross margins rose for the first time in several quarters, increasing 20 basis points to 46.5 percent in quarter and beating the average analyst estimate of 45.8 percent.
The margin growth comes even as the maker of Curry 5 and Project Rock 1 sneakers spends heavily on international markets.
The company is shifting focus from its North America business, where sales fell 1.6 percent during the third quarter. International sales rose 15.1 percent.
Under Armour raised its full-year adjusted earnings per share forecast to between 19 cents and 22 cents from a prior guidance of 16 to 19 cents.
Net profit rose to $75.3 million, or 17 cents per share, in the quarter ended Sept. 30. Excluding certain items, Under Armour earned 25 cents per share, beating analysts’ estimate of 12 cents.
Net revenue rose 2.4 percent to $1.44 billion, edging past analysts’ average estimate of $1.42 billion, according to Refinitiv data.
Under Armour’s shares were up 19.4 percent at $20.07, adding to a 26 percent gain this year.
Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty
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