Under Armour today reported Q2 earnings and "posted better-than-expected" sales results despite reporting a loss of nearly $96M, and the company said that it is "on track to become more efficient and strengthen its brand," according to Lorraine Mirabella of the BALTIMORE SUN. UA reported a loss of $95.5M in the quarter that ended June 30, "compared with a loss" of $12.3M in Q2 '17. But sales growth of 8% to $1.17B for the April-to-June period "topped expectations." The brand has a "restructuring plan in place, expected to cost" up to $210M, to "turn around underperforming parts of the business, including by improving product distribution and bringing excess levels of inventory under control" (BALTIMORESUN.com, 7/26). In Baltimore, Holden Wilen notes Q2 "continues an upward trajectory" for UA after it lost 50% of its share value last year. Sales in North America increased 2% to $843M. North American sales "account for about" 72% of UA's total revenue and "had been declining in previous quarters." International sales, 26% of the company's total, "continued their upward trajectory" by increasing 28% to $302M. UA's apparel revenue increased 10% to $747M, "driven by training and running." Footwear sales increased 15% in Q2 to $271M (BIZJOURNALS.com, 7/26). At presstime, shares of UA were trading at $20.79, up 5.3% from the close of business yesterday (THE DAILY).
STILL WORK TO DO: The WALL STREET JOURNAL's Aisha Al-Muslim notes increased revenue for UA was "offset by restructuring and impairment charges" of $79M. The company’s inventory levels increased 11% to $1.3B. The company’s inventory has been "worrisome to analysts and investors because the increases could possibly lead to discounting" (WSJ.com, 7/26). The FINANCIAL TIMES' Mamta Badkar notes UA was "among the beneficiaries of the athleisure trend used to describe a preference for wearing more casual clothes like workout gear outside of the gym." The company had "focused on its so-called sports lifestyle unit," which Founder, Chair & CEO Kevin Plank previously called the company’s "largest opportunity." Competition from rivals like Adidas has "hurt Under Armour’s growth" (FT.com, 7/26). BLOOMBERG NEWS' Eben Novy-Williams notes UA's results "continue a general upswing in the U.S. shoe and sports apparel world." Execs "see the second half of the year as a critical period for evaluating the company’s new direction." As inventory overhead "shrinks and new products and production come on line, investors will get a clearer picture of whether the restructuring is working" (BLOOMBERG NEWS, 7/26).
DEEPER LOOK: Susquehanna Int'l Group Senior Research Analyst Sam Poser said shares of UA are up today “because the inventories were down less than people anticipated.” Poser said of the company going forward, “They got a lot of work to do. The problem is they're moving a lot of goods through down market channels ... (because) it's hard to start selling full price premium product when you're promoting a lot of stuff” at discounted prices.” Poser: "I know the street seems to be expecting a major turnaround in '19. If it happens, it's going to be a lot later than that" (“Squawk Box,” CNBC, 7/26).
GREAT EXPECTATIONS: Yahoo Finance’s Daniel Roberts on Twitter noted UA “forecasts it will lose” $50-60M in '18, but with "earnings reports, all that matters is expectations: $UAA beats on revenue, meets on EPS, stock up.” CNBC business reporter Jess Golden tweets Plank is “playing the long game” and “relying on the strength of the innovation pipeline. Great product wins.” CNN’s Paul La Monica: “Under Armour comeback for real? Beat on earnings. Strong international sales growth again but revs up in North America too. ... Keep eye on $NKE and $ADDYY too.” CNN’s Nathaniel Meyersohn: “Plank gives an extended shoutout to Steph Curry on Under Armour earnings call. (Thank you Steph and please never leave!).”
