Despite some recent “cooling” with consumers in Eastern Europe and concerns over Red Sea shipping disruptions, Under Armour is pleased with the trajectory of its business in Europe. In the product area, the brand is seeing sales traction from its Meridian products for women; its Curry 11 products; and its Velocity Elite and Infinite running franchises. The region, buoyed by England, Spain and France, generated 67 percent operating income growth to $51.6 million in Q3, ended Dec. 31, from a 7.1 percent sales increase to $284.0 million from $265.3 million. For the first nine months of the group’s FY, the EU’s revenue expansion was 8.8 percent to $797.8 million.
CFO Dave Bergman said the current financial impact from increased shipping costs related to Red Sea disruptions is approximately $1-$2 million.
In Q3, Under Armour beat EPS expectations, although its overall revenue lagged. With the results, citing a mixed retail environment, the company tightened its FY24 forecast for the 12 months ending March 31 to a 3 to 4 percent decline in total revenues, 120 to 130 percent improvement in year-over-year gross margins, and an operating income range of $287 to $297 million.
Net income declined by 6.1 percent to $114.1 million from $121.6 million in Q3. Operating income was down nearly 27 percent to $69.5 million, as total sales fell by 6 percent to $1.49 billion from $1.58 billion. Gross margin improved by 100 basis points to 45.2 percent. Both footwear and apparel suffered sales declines during the period. Apparel sales contracted by 5.5 percent to $1.02 billion, as footwear sales slipped by 6.6 percent to $331 million. By channel, wholesale revenues tumbled by 13.2 percent to $711.7 million but direct-to-consumer (DTC) sales rose by 3.5 percent to $740.5 million.
Geographically, the EMEA and Latin America were the only two regions to post higher sales during the period. Latin America’s quarterly operating profit soared 134 percent to $13.6 million on 9.4 percent revenue growth to $69.8 million. In Asia-Pacific, operating income increased by 48 percent to $16.0 million on 7.1 percent sales expansion to $212.0 million. And in Under Armour’s home North American market, Q3 operating income descended by 19 percent to $161.7 million on an 11.8 percent revenue contraction to $915.4 million.
After 11 months on the job, CEO Stephanie Linnartz told analysts last week about the make-up of the company’s new senior management team, which includes a new Chief Design Officer, John Varvatos; a new Chief Product Officer, Yassine Saidi; and the Chief Supply Chain Officer, Shawn Curran, who spent 30 years at Gap. Under Armour is presently looking for a new chief marketing officer and head of footwear. In the EMEA, Kevin Ross is taking over as SVP and Managing Director to replace Cara Trent, who will now lead the brand’s North American region.
