Shares of Under Armor Inc. pulled a sharp U-turn into negative territory on Wednesday, as the athletic apparel and gear seller chased a big fiscal third-quarter profit with warnings of more gross margin pressure, continuing to promote and compete with higher prices. The growing list among discounts for.
Class C shares UA,
They were up 1.7% minutes after the opening bell, and moved up 8.4% premarket before plunging 10.3% in afternoon trading. This puts them on track for their biggest one-day decline since their 15.8% drop on May 19, 2022. Class A shared UAA,
,[D]Due to higher-anticipated Q3 promotional headwinds, we now expect full-year fiscal 2023 gross margin declines to be at the high end of the 375 to 425 basis point range previously provided. [3.75 percentage points to 4.25 percentage points],” Chief Financial Officer Dave Bergman said on a post-earnings conference call with analysts, according to a transcript provided by Alphasense/Santio.
Bergman said the reason for the gross margin weakness will be the continued negative impact of “high promotions and discounts” as the company continues to manage inventory against a challenging retail backdrop.
In the fiscal third quarter, inventories rose 47.7% to $1.22 billion from a year earlier, after rising 31.0% to $1.08 billion in the second quarter.
Interim Chief Executive Officer Colin Brown said he expected inventory growth rates to peak at the end of the fiscal year, followed by “advanced yet reasonable step-downs in the following quarters.”
Wedbush analyst Tom Nikic reiterated the outperform rating he received on Under Armor through October 2021, saying he’s “long been fascinated” by the company’s turnaround potential and the stock’s cheap valuation. But he acknowledged that “they certainly haven’t made it easy on us on the bulls,” as downbeat inventory and gross margin trends fueled better-than-expected profit and outlook.
“We’re sticking with the name, but we don’t think this print is going to turn skeptics into believers,” Nikic wrote in a note to subscribers.
Before the opening bell, the company reported net income for the quarter ended Dec. 31 rose to $121.6 million, or 27 cents per share, from $109.7 million, or 23 cents per share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share of 16 cents was well above the FactSet consensus of 9 cents.
Revenue rose 3.4% to $1.58 billion, versus a FactSet consensus of $1.55 billion.
Footwear revenue increased 25.3% to $354.4 million, as improved product availability helped boost sales in the sports, team sports and American football categories.
Meanwhile, apparel revenue fell 2.1% to $1.08 billion, as CFO Bergman said softness in training apparel offset strength in gold and team sports. And luggage revenue declined 1.7% to $104.9 million, as softer sales of cold-weather luggage more than offset strength in bags.
For fiscal 2023, large third-quarter profits despite a downbeat gross margin outlook prompted the company to raise its guidance range for adjusted EPS from 52 cents to 56 cents to 44 cents to 48 cents. The company kept its revenue guidance for growth in the low single-digit percentage range.
FactSet’s consensus for EPS was 46 cents, and implied growth of 2.7% to the FactSet revenue consensus of $5.86 billion.
The Class C shares are still up 37.7% over the past three months, while rival Nike Inc. of NKE,
The stock is up 30.1% and the S&P 500 SPX,
has increased by 7.7%.
Credit: www.marketwatch.com /