Kevin Plank, founder and chief executive officer of Under Armour Inc., speaks during the 2017 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Friday, Jan. 6, 2017.
Patrick T. Fallon | Bloomberg | Getty Images
Under Armour shares plunged 15% Tuesday after the retailer reported mixed results for the fiscal second quarter and lowered its forecast for the year.
The athletic apparel retailer now expects sales in North America to decline slightly in 2019. Previously, it expected revenue on its home turf to be “relatively flat.” Under Armour has been struggling to keep pace with rivals Nike, Lululemon and Adidas in the U.S., and it has been forced to use heavy promotions to get rid of unsold merchandise in retailers like Kohl’s and Dick’s Sporting Goods — a tactic that weighs on profits.
CEO Kevin Plank said in a statement that Under Armour remains “sharply focused on … long-term strategies.”
Here’s what Under Armour reported for its fiscal second quarter ended June 30, compared with what analysts were expecting, based on data pulled from Refinitiv:
- Adjusted per-share loss: 4 cents vs. 5 cents expected
- Revenue: $1.192 billion vs. $1.199 billion expected
Under Armour reported a narrower net loss of $17.3 million, or 4 cents a share, compared with a loss of $95.5 million, or 21 cents per share, a year earlier. The loss in the latest period included a hit of a penny per share from its minority stake in a Japanese licensee. The results were better than the loss of 5 cents per share that analysts were expecting, according to Refinitiv.
Net revenue for the second quarter was $1.192 billion, up from $1.175 billion a year earlier but missing estimates for $1.199 billion.
Under Armour said apparel sales were down 1.1%, while footwear was up 4.7%.
In North America, sales dropped 3.2% during the quarter, while its international business grew 12% and now represents 28% of total revenue.
Inventories dropped 26% to $966 million, as Under Armour has been working through an inventory glut that weighed on its business through much of 2018.
The company is still calling for earnings of 33 to 34 cents per share for the fiscal year. Analysts had been calling for 35 cents per share, according to Refinitiv.
Under Armour’s biggest challenge remains getting back to growth in North America, a market where more shoppers are increasingly buying athletic apparel and sneakers as casual wear. But Under Armour’s gear is better known for being worn during high-endurance activities.
On a post-earnings conference call with analysts, Chief Operating Officer Patrik Frisk described Under Armour’s business in North America as “a bit of a mixed bag with challenges to work through and pockets of strength to build on.”
“I think we’re kind of bullish on the North American consumer in terms of that being a stable picture for the back half of the year,” he added.
Plank told analysts some of the companies biggest initiatives in North America remain pulling merchandise out of off-price channels and selling more directly to consumers, investing more in e-commerce and getting in front of shoppers with marketing in a “louder” way.
Under Armour has also said it wants to win over more women, though those efforts weren’t mentioned on Tuesday’s call. So is Nike with sports bras and yoga pants, and start-ups like Outdoor Voices, Bandier and Gap‘s Athleta brand are flooding the space.
As of market close on Monday, Under Armour shares had rallied more than 50% this year.