Under Armour is now forecasting annual revenues to decline by 2 to 4 percent, down from prior guidance of “flat to up slightly,” but gross margin to improve by 100 to 125 basis points instead of a 25- to 75-basis-point increase. The group’s outlook on FY operating income remains in the $310 to $330 million range. The calendar year-end inventory level is forecast to be down and be down mid to high teens at the end of Q4 on March 31.
In Q2 ended Sept. 30, operating income improved by 22.0 percent year-over-year to $145.8 million from $119.4 million on essentially flat total revenues of $1.57 billion. Gross margin increased by 260 basis points to 48.0 percent from 45.4 percent, driven by lower freight expenses that were partially offset by a normalization of off-price sales. Net income came in 26 percent higher year-over-year at $109.6 million against $86.9 million.
By category, apparel sales lifted 3.1 percent higher to $1.07 billion; footwear sales slipped by 6.6 percent to $351.2 million, and accessories revenues gained 2.5 percent to $113.9 million. Licensing sales were down by 13.5 percent to $28.6 million. By channel, direct-to-consumer sales increased by 3.2 percent to $595.8 million and declined by nearly 1.0 percent at wholesale to $939.7 million.
Regionally, EMEA and Asia-Pacific were Under Armour’s strongest markets in the period. Aided by solid growth in DTC and wholesale, EMEA revenues rose by 9.3 percent to $287.1 million. APAC quarterly sales improved by 2.8 percent year-over-year to $232.1 million. The region now has 7.5 million members in the brand’s loyalty program.
Second quarter sales in Under Armour’s home US market were down by 2 percent to $991.4 million but in line with expectations. The group is forecasting additional contraction in North America, largely due to ongoing pressures in the market’s wholesale segment.
“None of us are happy with the fact we’re not moving faster here [in the US],” CEO Stephanie Linnartz told analysts. However, the former Marriott executive added that Under Armour is pleased with the brand’s distribution effort that will result in 40 percent higher mall penetration by the end of FY24 and its strategy to keep off-price sales to 3 to 4 percent of global revenues since FY20.
On the personnel front, Under Armour is currently searching for a new head of product and a new lead person on design to join the company’s new Chief Design Officer, John Varvatos.
