Under Armour had a difficult second quarter, ending with a loss that was below analysts' consensus, sending the share price down by 15 percent. Its net loss narrowed to $17.3 million, against $95.5 million for the second quarter of 2018.
The group's revenues inched up by 1 percent to $1,191 million, or by 3 percent in constant currencies, hampered by North America, where the brand continues to face significant challenges in a very competitive environment from more international brands such as Nike, Adidas and Puma.
North American revenues dipped by 3 percent to $816 million. Both wholesale and direct-to-consumer sales were down in the region. DTC was soft in both the retail and digital channels, as lower traffic diminished retail sales while lower conversion rates hit online sales despite good traffic. However, the region's operating income improved by 5.0 percent to $139.2 million.
Abroad, however, sales continued to rise briskly, jumping by 12 percent to $339 million, or by 17 percent in constant currencies and representing 28 percent of total revenues. The progress was led by the Asia-Pacific, where sales soared by 29 percent in constant currencies, rising to $154.1 million, driven by continued expansion with key partners as well as sustained momentum in the DTC business. The regional operating income fell by 8.9 percent to $19.6 million, following the disclosure of an unexpected loss by UA's Japanese licensee, and the losses are expected to persist for the rest of the year.
EMEA sales advanced by 11 percent in constant currencies, reaching $145.3 million in the quarter, with continued growth in wholesale and DTC operations. There was good progress in Europe in terms of profitability, with an operating profit of $10.5 million contrasting with a loss of $5.9 million for the year-ago quarter.
Latin America was up by 2 percent on a constant-currency basis to $39.7 million. However, the region remained loss-making – with an operating loss of $3.8 million compared with a loss of $4.7 million for the second quarter of 2018 – as the company is resetting its distribution there, along with many other international brands frustrated by the market situation, according to the company.
On a global basis, UA's wholesale revenues dropped by 1 percent to $707 million, while DTC went up by 2 percent to $423 million, representing 35 percent of revenues in the quarter.
The company saw footwear sales improve by 5 percent to $284 million, while apparel revenues went down by 1 percent to $740 million. Accessories remained flat at $106 million.
Licensing revenues rose by 20 percent to $25.3 million, driven primarily by a settlement with one of the group's North American partners. The connected fitness division's revenues improved by 10 percent to $31.9 million.
The company's gross margin rose by 1.70 percentage points to 46.5 percent, thanks to supply chain improvements, restructuring initiatives and the regional mix. The management said it was pleased with the overall impact of its recent moves to consolidate its vendor base and noted that it has continued to shorten its lead times.
Under Armour slightly raised its operating income forecast for the full financial year to $230-235 million from an initial forecast of $220-230 million, with revenues still growing by 2-3 percent. The gross margin is expected to expand by 1.1 to 1.3 percentage points, on supply chain improvements and lower closeouts.