The skies still look kind of gloomy for Under Armour.
Despite posting third-quarter results that met expectations, the Baltimore-based sports brand downscaled its projections for the fiscal year, now expecting a slightly larger sales decline and lower earnings per share.
Before the market opened Thursday, Under Armour reported net income of $114.1 million, or 26 cents a share, for the fiscal quarter ended Dec. 31. Revenue fell 6 percent to $1.5 billion from $1.6 billion a year ago. Both of these figures were above analyst projections and the company’s stock rose in pre-market trading Thursday.
The net income figure was impacted by a $50 million earn-out benefit in connection with the sale of the MyFitnessPal platform, the litigation reserve expense and related tax impacts. Without that, the adjusted net income was $84 million.
As a result, Under Armour is now expecting sales to decline 3 percent to 4 percent in fiscal year 2024, down from the previous expectation of a 2 percent to 4 percent dip. And earnings per share are now expected to be between 50 cents and 52 cents a share, against analyst projections of 49 cents. Operating income is expected to reach somewhere between $287 million to $297 million.
“Despite a mixed retail environment during the holiday season, our third quarter revenue results were in line with our expectations; we were able to deliver better than anticipated profitability and remain on track to achieve our full-year outlook,” said Under Armour president and chief executive officer Stephanie Linnartz. “As we close out fiscal 2024 and our strengthened leadership team begins to come up to speed in the quarters ahead, we are working to reset Under Armour toward a path of improved revenue growth and enhanced value creation in the future.”
Wholesale revenue decreased 13 percent in the period to $712 million, and direct-to-consumer revenue increased 4 percent to $741 million due to a 5 percent increase in owned and operated store revenue and a 2 percent increase in e-commerce sales which represented 45 percent of the total direct-to-consumer business in the quarter.
The company continues to struggle in North America where sales fell 12 percent to $915 million, but international revenue increased 7 percent to $566 million thanks to a 7 percent jump in sales in both the EMEA and Asia-Pacific regions, and a 9 percent gain in Latin America.
By category, apparel revenue decreased 6 percent to $1 billion and footwear sales were down 7 percent to $331 million. Accessories revenue was flat at $105 million.
Gross margin increased 100 basis points to 45.2 percent, driven mainly by lower freight costs. However this number was partially impacted by higher sales to the off-price channel and increased promotional activities in the direct-to-consumer business.