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Under Armour, Inc. UAA delivered better-than-expected results in first-quarter fiscal 2024, wherein revenues and earnings surpassed the Zacks Consensus Estimate. Both the top and bottom lines fell year over year. However, the company reaffirmed guidance for fiscal 2024.
The company reported adjusted earnings of 2 cents a share, which beat the Zacks Consensus Estimate of a loss of 3 cents per share. The company recorded earnings of 20 cents a share in the year-ago period.
Meanwhile, net revenues of $1,317 million came ahead of the consensus estimate of $1,298 million but fell 2% on a year-over-year basis. The metric also slipped 1% on a currency-neutral basis.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote
The company’s wholesale revenues decreased 6% year over year to $742 million, while direct-to-consumer (DTC) revenues inched up 4% to $544 million due to a 6% rise in e-commerce revenues, which represented 40% of the total DTC business. Sturdy results in the e-commerce and retail channels aided the performance. It recorded 3% growth in owned and operated store revenues.
Let’s Delve Deeper
By product category, Apparel revenues edged down 5% year over year to $824.7 million, while Footwear revenues increased 5% to $363.7 million. Revenues from the Accessories category inched up 1% to $97.9 million. Meanwhile, Licensing revenues tumbled 10.9% to $25.1 million, driven by softness in the Japanese licensee and North American unit.
Net revenues from North America decreased 9.1% to $826.7 million. Meanwhile, revenues from the international business increased 12% (up 15% on a currency-neutral basis) to $485 million.
Within the international business, net revenues in EMEA jumped 10.5% to $226.6 million (up 11% at constant currency), 14.5% in Asia-Pacific (up 21% at constant currency), and 12.7% in Latin America (up 5% at constant currency).
The company’s gross margin shrunk 60 basis points to 46.1% from the prior-year period due to increased promotions and adverse foreign currency movements, partly offset by supply-chain gains associated with reduced freight expenses. Selling, general and administrative (SG&A) expenses dipped 1% to $587 million.
The company’s operating income fell to $20.9 million from $34.5 million. The operating margin was 1.6%, down from 2.6% in the year-earlier quarter.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of nearly $703.6 million, long-term debt (net of current maturities) of $594.1 million and total stockholders’ equity of $2,005.4 million. The inventory jumped 38% to $1.3 billion.
For fiscal 2024, management expects capital expenditures in the range of $250-$270 million.
FY24 Guidance
Management reiterated view for fiscal 2024. For the current fiscal year, Under Armour expects revenues to be flat to slightly up. It expects the gross margin to be up 25-75 basis points, compared with the prior year’s margin of 44.9%, backed by supply-chain tailwinds with respect to lower freight costs. The figure is likely to be partly offset by mix impacts stemming from higher off-price revenues and increased promotions in the company’s DTC business. SG&A expenses are anticipated to be flat to slightly up.
Under Armour expects the operating income to be between $310 million and $330 million versus the comparable baseline period’s operating income of $284 million.
UAA expects earnings in the band of 47-51 cents per share, down from 84 cents per share reported in fiscal 2023. The company reported adjusted earnings of 58 cents a share for the comparable baseline period. Capital expenditures are likely to come in the band of $250-$270 million.
For the fiscal second quarter, revenues are likely to be flat to down slightly year over year, including a low single-digit fall in the company’s North American business. This will be partly offset by mid-single-digit increase in the international business. In addition, it anticipates the year’s highest revenue growth rate in the fourth quarter.
Further, the gross margin is likely to grow nearly 100-150 basis points in the second quarter on gains from lower freight costs, somewhat offset by the ongoing promotional activity. It anticipates the third quarter to be the year’s smallest quarterly gross margin improvement on inventory-management efforts.
Second-quarter operating income is expected in the bracket of $115-$135 million, translating to 18-21 cents as earnings per share. Further, inventory is estimated to be up at a mid to high single-digit percentage rate at the end of the fiscal second quarter.
Image Source: Zacks Investment Research
This Zacks Rank #3 (Hold) company has risen 0.2% in the past three months, compared with the industry’s 1.2% fall.
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Some better-ranked companies are Royal Caribbean RCL, lululemon athletica LULU and Ralph Lauren RL.
Royal Caribbean sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
RCL has a trailing four-quarter earnings surprise of 26.4%, on average. The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates increases of 48.7% and 162.9%, respectively, from the year-ago period’s reported levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank #2 (Buy), at present.
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Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 17.4%, on average.
The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago corresponding figures.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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