Under Armour flags broad-based weakness, sees steeper-than-expected third-quarter sales decline
Nov 6 (Reuters) - Under Armour UAA.N on Thursday flagged weakness across its portfolio, as the athletic apparel maker grapples with a challenging consumer environment and aggressive discounting by competitors clearing inventory.
The company also cut its annual gross margin forecast, saying Middle East-related disruptions had extended beyond its previous expectations, adding to pressure from elevated fuel and freight costs.
Shares of the company, which plunged about 12% premarket, were flat in the morning trading.
Here are some details:
The company reported declines across all major product categories in the second quarter, led by an about 11% drop in footwear sales, while apparel fell 6% and accessories about 7%.
It now expects third-quarter revenue to decline about 8% to 9%; analysts expected a fall of about 4%, according to data compiled by LSEG
It also sees adjusted loss of one to three cents in the quarter, well below expectations of four cent profit
The company expects annual gross margin to increase 170 to 220 basis points, slower than its prior view of a 220 to 270 basis-point improvement
Under Armour forecasts low double-digit decline in the third-quarter in North America, a major revenue contributor
Current traffic and macroeconomic pressures could result in North America declining more than previously anticipated this fiscal year, CFO Reza Talaghani said on a post-earnings call
Under Armour's second-quarter revenue and adjusted earnings per share edged past expectations
"Under Armour is making progress on simplifying the business, cutting costs, and upgrading its products, but there's a long way to go," Morningstar analyst David Swartz said, adding that the company's turnaround remains challenged by weak industry demand, widespread promotional activity and high gas prices
Under Armour forecast a roughly $45 million impact from the Middle East conflict, up from the prior view of $35 million