Lifted by its growth abroad, Under Armour posted a sales increase of 6 percent to about $1,200 million for the first quarter, up by 4 percent in constant currencies. The increase was entirely driven by international markets, which grew by 27 percent - or by 19 percent in constant currencies - and represented 24 percent of total revenues. Conversely, sales in North America inched down by 0.4 percent to $867.5 million.
The company ended the quarter with a net loss of $30 million, up from a net loss of $2.2 million in the first quarter of 2017, due to a restructuring plan currently implemented by the company. The management said it is “holistically” transforming the group to ensure that the consumer is always first, simplifying its operations, increasing speed across its global ecosystem and prioritizing investments based on the return. Excluding the impact of the restructuring plan, the company reached an adjusted net income of $1 million.
The strong growth in international sales included a rise of 23.4 percent to $103.9 million in Europe, the Middle East and Africa (EMEA), with a balanced performance across wholesale and direct-to-consumer (DTC) operations, including particularly strong growth in the U.K. and solid results in Spain and Italy. During the quarter, the company introduced Massimo Baratto as its vice-president and managing director for the region, hoping that he will boost the profitability of the European operations, along with the establishment of higher brand awareness and more strategic partnerships across the region. He previously ran Oberalp, the brand's Italian distributor.
Under Armour's sales soared by 34.6 percent in Asia-Pacific to $115.5 million, This region saw strong growth in both the wholesale and DTC sides of the business, with continued significant momentum in China. In Latin America, sales were up by 21 percent to $46.5 million, driven by the brand's ongoing momentum in Mexico and Chile, along with expansion in Argentina and Colombia.
Despite a strong turnover, the international business remains a costly investment for the company, as it reported operating losses of $3.6million in EMEA and $5.8 million in Latin America for the quarter. However, Under Armour reaped an operating profit of $21.2 million in Asia-Pacific.
The company suffered an operating loss in North America as well. It amounted to $43.5 million, compared with a profit of $3.7 million.
The brand's global apparel sales rose by 7.1 percent to $766.2 million, while footwear inched up by 0.8 percent to $271.7 million and accessories advanced by 3.4 percent. Licensing revenues grew by 8.8 percent to $26.3 million and the group's Connected Fitness unit improved its turnover by 34.4 percent to $28.8 million.
On the product front, Under Armour highlighted UA HOVR, the brand's latest innovation in footwear cushioning technology, which debuted in February with two running styles. It will continue to expand into other key footwear categories in the coming seasons.
Worldwide, Under Armour's wholesale business was up by just one percent to $779 million, while its DTC business firmed up by 17 percent to $352 million.
The gross margin declined by 1.2 percentage points to 44.2 percent, as a favorable impact from currency exchange rates was more than offset by accelerated inventory management initiatives. The adjusted gross margin, which excludes an impact of $8 million related to restructuring efforts, stood at 44.8 percent, a decrease of 0.6 percentage points.
For the present full financial year, the company expects revenues to be up by a low single-digit rate, reflecting a mid-single-digit decline in North America and international growth greater than 25 percent. The gross margin should increase by about 0.5 percentage points to 45.5 percent, due to benefits from planned lower promotional activity, product costs, channel mix and changes in foreign currency.
