Under Armour raised its previous guidance for the full financial year while reporting better-than-expected results for the second quarter. Sales increased by 91 percent from the year-earlier quarter to $1,352 million, comfortably exceeding an analyst consensus for a top line of about $1,200 million. They were up by 85 percent on a currency-neutral basis, and they were 13 percent higher than in the corresponding period of 2019.
The company now forecasts sales growth in the low twenties, up from previous guidance for high-teens percentage growth, with its international business rising at a mid-thirties. Initial expectations at the start of the year been for a high-single digit growth rate.
In the second quarter, UA’s revenues increased by 101 percent in North America to $905.5 million and its international revenues went up by 100 percent to $446 million, with an 84 percent rise on a constant-currency basis.
Within its international business, revenues increased by a reported 133 percent in the EMEA region to $207.2 million, or by 116 percent at constant currency rates. Asia-Pacific revenues went up by 56 percent to $192.4 million, with a 43 percent rise at constant currency rates, while revenues from Latin America soared by 317 percent to $46.5 million, with 284 percent growth in currency-neutral terms.
Sales in EMEA were up 43 percent from the second quarter of 2019. They were boosted by an updated e-commerce platform for the region. In North America, UA gained shelf space at key retailers while working to reduce the number of wholesale doors from 12,000-13,000 currently to 10,000 by the year-end, cutting off those that are not supporting the brand well.
The company’s wholesale revenues grew by 157 percent to $768 million, while its direct-to-consumer (DTC) revenues rose by 52 percent to $561 million, driven by strong growth at directly operated stores, offset by an 18 percent decline in e-commerce, which had boomed last year amid the Covid-19-related store lockdowns. E-commerce represented 39 percent of UA’s total DTC business in the quarter.
Within product categories, apparel revenues increased by 105 percent to $874.2 million while footwear rose by 85 percent to $342.6 million and accessories went up by 99 percent to $111.5 million.
The company’s bottom line turned around to a profit of $59.2 million, or $0.13 per share, from a loss of $182.9 million last year. It was helped by a drop in restructuring and impairment charges to $2.6 million from $38.9 million in the year-ago period. Adjusted EPS amounted to $0.24, well above a consensus of about $0.06. The gross margin increased by 0.2 percentage points from the year earlier to 49.5 percent, due primarily to pricing and foreign currency benefits, offset by the channel mix and the sale of the MyFitnessPal platform, which enjoyed a higher gross margin.
UA booked operating income of $121.2 million for the quarter versus a loss of $169.7 million in the second quarter of 2020. In its North America business, the operating income soared to $225.8 million from $30.8 million. For the EMEA region, the company reported an operating profit of $39.9 million after a loss of $0.6 million the year earlier. In the Asia-Pacific region, the operating income amounted to $24.0 million versus a $12.4 million loss. In Latin America, the operating profit stood at $6.0 million versus a $4.4 million loss a year earlier. The operating loss from corporate activities not divided into geographical regions narrowed to $174.5 million from $182.9 million.
The company’s gross margin for the full year is now seen rising by 0.5 to 0.7 percentage points compared to previous expectations of an improvement of around 0.5 percentage points as compared to the prior year’s adjusted gross margin of 48.6 percent, as expected pricing and foreign currency benefits should offset the sale of the MyFitnessPal platform and higher freight expenses.
The operating income for the full year is seen reaching $215 million to $225 million, about double the previous guidance of $105 million to $115 million. Excluding the impact of restructuring efforts, the adjusted operating income is expected to go up to $340 million to $359 million versus previous expectations of $230 million to $249 million. Diluted earnings per share are seen at $0.14 to $0.16 compared with prior guidance of a $0.02 to $0.04 loss per share and adjusted diluted EPS at $0.50 to $0.52 versus the previous guidance range of $0.28 to $0.30.
