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Under Armour (UAA) Q1 Earnings Beat, Wholesale Revenues Fall
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Under Armour, Inc. (UAA - Free Report) reported first-quarter fiscal 2025 results, wherein both the top and bottom lines beat their respective Zacks Consensus Estimate. However, both metrics dropped year over year.
Revenue & Earnings Picture
The Baltimore-based company reported adjusted earnings of 1 cent per share, which beat the Zacks Consensus Estimate of an adjusted loss of 8 cents. However, the bottom line decreased from the year-ago figure of 2 cents.
Meanwhile, net revenues of $1,183.7 million surpassed the Zacks Consensus Estimate of $1,139 million. This top line declined 10.1% year over year and 10% on a currency-neutral basis.
Wholesale revenues declined 8.3% year over year to $680.5 million due to soft demand in full-price and distributor businesses, along with reduced sales to the off-price channel. Direct-to-consumer revenues decreased 11.8% to $480.2 million. Revenues from owned and operated stores declined 3%. eCommerce revenues, which dropped 25% due to planned decreases in promotional activities, account for 34% of the total direct-to-consumer revenues for the quarter.
Under Armour, Inc. Price, Consensus and EPS Surprise
Coming to the product category, Apparel revenues decreased 8.1% year over year to $757.8 million. Footwear revenues decreased 14.7% to $310.4 million. Revenues from the Accessories category fell 5.4% to $92.5 million. Also, Licensing revenues decreased 13.6% to $21.7 million.
The Zacks Consensus Estimate for Apparel revenues was pegged at $704.8 million for the quarter, and the same for Footwear revenues was pinned at $313.9 million.
Net revenues from North America declined 14.2% year over year to $709.3 million, which surpassed the Zacks Consensus Estimate of $668.5 million for the quarter. Meanwhile, revenues from the international business decreased 2.4% (down 2% on a currency-neutral basis) to $473.1 million.
Within the international business, net revenues from the EMEA increased 0.1% year over year to $226.9 million. Revenues from the Asia-Pacific tumbled 10.1% to $181.8 million, while that from the Latin American region grew 15.6% to $64.4 million.
The company’s gross profit declined 8% year over year to $562.7 million. Gross margin expanded 110 basis points to 47.5%, largely propelled by 170 basis points of pricing benefits from reduced discounting in the direct-to-consumer segment and lower product costs. However, this increase was partially offset by adverse effects from foreign currency fluctuations, a shift in channel and regional mix, and challenges related to the timing of supply-chain benefits from the previous year.
Adjusted SG&A expenses declined 6% year over year to $554.7 million. This was mainly due to ongoing cost management actions, including headcount reductions and reduced marketing expenses for the quarter. Adjusted operating income totaled $8 million in the quarter under review.
Image Source: Zacks Investment Research
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $884.6 million, a long-term debt (net of current maturities) of $595.4 million, and total stockholders' equity of $1.82 billion. For fiscal 2025, management expects capital expenditures to be between $200 million and $220 million.
During the fiscal first quarter, the company approved a $500-million stock repurchase program. It also repurchased $40 million worth of its Class C common stock, retiring 5.9 million shares, leaving approximately $460 million under the authorization.
Fiscal 2025 Restructuring Plan
In May 2024, Under Armour announced a restructuring plan aimed at enhancing the company's financial and operational efficiencies. The plan is estimated to cost between $70 million and $90 million.
So far, the company has recognized $25 million in restructuring and impairment charges, along with $9 million in other related transformation expenses. Of the $34 million incurred to date, $19 million has been in cash expenses, while $15 million represents non-cash charges. The company expects to incur the remaining charges under this restructuring plan during fiscal 2025.
FY25 Outlook
Under Armour expects revenues to decrease by a low double-digit percentage. This includes an anticipated decline of 14-16% in North America (indicating an improvement from the previously expected decline of 15-17%) as the company undertakes significant efforts to reset this business. The international business is projected to see a low-single-digit percentage decline, with flat year-over-year sales in EMEA, offset by a high-single-digit decline in the Asia-Pacific region due to emerging macroeconomic pressures.
The gross margin is expected to increase 75-100 basis points from the previous year’s level, driven by a significant reduction in promotional and discounting activities in the direct-to-consumer segment and benefits from lower product costs. However, these gains are likely to be partially offset by new challenges, including higher ocean freight costs, unfavorable foreign currency impacts and an adverse shift in channel mix.
Adjusted selling, general and administrative expenses are expected to decrease by a low-to-mid single-digit percentage. The company projects an operating loss of $194-$214 million. When excluding the midpoint of anticipated restructuring charges and litigation reserve expenses, adjusted operating income is expected to range between $140 and $160 million, up from the previous projection of $130-$150 million. Adjusted earnings per share are projected to be between 19 cents and 22 cents.
This Zacks Rank #3 (Hold) company’s shares have risen 14.9% in the past three months against the industry’s decline of 16.6%.
Key Picks
Some better-ranked stocks in the retail space are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Urban Outfitters Inc. (URBN - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. The company currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from the fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.1%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. It currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2024 earnings and sales indicates growth of 9.9% and 5.8%, respectively, from the year-ago reported actuals. URBN has a trailing four-quarter average earnings surprise of 16.9%.
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Under Armour (UAA) Q1 Earnings Beat, Wholesale Revenues Fall
Under Armour, Inc. (UAA - Free Report) reported first-quarter fiscal 2025 results, wherein both the top and bottom lines beat their respective Zacks Consensus Estimate. However, both metrics dropped year over year.
Revenue & Earnings Picture
The Baltimore-based company reported adjusted earnings of 1 cent per share, which beat the Zacks Consensus Estimate of an adjusted loss of 8 cents. However, the bottom line decreased from the year-ago figure of 2 cents.
Meanwhile, net revenues of $1,183.7 million surpassed the Zacks Consensus Estimate of $1,139 million. This top line declined 10.1% year over year and 10% on a currency-neutral basis.
Wholesale revenues declined 8.3% year over year to $680.5 million due to soft demand in full-price and distributor businesses, along with reduced sales to the off-price channel. Direct-to-consumer revenues decreased 11.8% to $480.2 million. Revenues from owned and operated stores declined 3%. eCommerce revenues, which dropped 25% due to planned decreases in promotional activities, account for 34% of the total direct-to-consumer revenues for the quarter.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote
Let’s Delve Deeper
Coming to the product category, Apparel revenues decreased 8.1% year over year to $757.8 million. Footwear revenues decreased 14.7% to $310.4 million. Revenues from the Accessories category fell 5.4% to $92.5 million. Also, Licensing revenues decreased 13.6% to $21.7 million.
The Zacks Consensus Estimate for Apparel revenues was pegged at $704.8 million for the quarter, and the same for Footwear revenues was pinned at $313.9 million.
Net revenues from North America declined 14.2% year over year to $709.3 million, which surpassed the Zacks Consensus Estimate of $668.5 million for the quarter. Meanwhile, revenues from the international business decreased 2.4% (down 2% on a currency-neutral basis) to $473.1 million.
Within the international business, net revenues from the EMEA increased 0.1% year over year to $226.9 million. Revenues from the Asia-Pacific tumbled 10.1% to $181.8 million, while that from the Latin American region grew 15.6% to $64.4 million.
The company’s gross profit declined 8% year over year to $562.7 million. Gross margin expanded 110 basis points to 47.5%, largely propelled by 170 basis points of pricing benefits from reduced discounting in the direct-to-consumer segment and lower product costs. However, this increase was partially offset by adverse effects from foreign currency fluctuations, a shift in channel and regional mix, and challenges related to the timing of supply-chain benefits from the previous year.
Adjusted SG&A expenses declined 6% year over year to $554.7 million. This was mainly due to ongoing cost management actions, including headcount reductions and reduced marketing expenses for the quarter. Adjusted operating income totaled $8 million in the quarter under review.
Image Source: Zacks Investment Research
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $884.6 million, a long-term debt (net of current maturities) of $595.4 million, and total stockholders' equity of $1.82 billion. For fiscal 2025, management expects capital expenditures to be between $200 million and $220 million.
During the fiscal first quarter, the company approved a $500-million stock repurchase program. It also repurchased $40 million worth of its Class C common stock, retiring 5.9 million shares, leaving approximately $460 million under the authorization.
Fiscal 2025 Restructuring Plan
In May 2024, Under Armour announced a restructuring plan aimed at enhancing the company's financial and operational efficiencies. The plan is estimated to cost between $70 million and $90 million.
So far, the company has recognized $25 million in restructuring and impairment charges, along with $9 million in other related transformation expenses. Of the $34 million incurred to date, $19 million has been in cash expenses, while $15 million represents non-cash charges. The company expects to incur the remaining charges under this restructuring plan during fiscal 2025.
FY25 Outlook
Under Armour expects revenues to decrease by a low double-digit percentage. This includes an anticipated decline of 14-16% in North America (indicating an improvement from the previously expected decline of 15-17%) as the company undertakes significant efforts to reset this business. The international business is projected to see a low-single-digit percentage decline, with flat year-over-year sales in EMEA, offset by a high-single-digit decline in the Asia-Pacific region due to emerging macroeconomic pressures.
The gross margin is expected to increase 75-100 basis points from the previous year’s level, driven by a significant reduction in promotional and discounting activities in the direct-to-consumer segment and benefits from lower product costs. However, these gains are likely to be partially offset by new challenges, including higher ocean freight costs, unfavorable foreign currency impacts and an adverse shift in channel mix.
Adjusted selling, general and administrative expenses are expected to decrease by a low-to-mid single-digit percentage. The company projects an operating loss of $194-$214 million. When excluding the midpoint of anticipated restructuring charges and litigation reserve expenses, adjusted operating income is expected to range between $140 and $160 million, up from the previous projection of $130-$150 million. Adjusted earnings per share are projected to be between 19 cents and 22 cents.
This Zacks Rank #3 (Hold) company’s shares have risen 14.9% in the past three months against the industry’s decline of 16.6%.
Key Picks
Some better-ranked stocks in the retail space are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Urban Outfitters Inc. (URBN - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. The company currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from the fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.1%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. It currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2024 earnings and sales indicates growth of 9.9% and 5.8%, respectively, from the year-ago reported actuals. URBN has a trailing four-quarter average earnings surprise of 16.9%.