Home Business Under Armor (UAA) reports sales below Wall Street estimates

Under Armor (UAA) reports sales below Wall Street estimates

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Under the armor sees a difficult year ahead, shaken by global supply chain challenges and another round of Covid blockades in China that are reducing demand.

The sneaker and apparel maker on Friday released disappointing forecasts for fiscal year 2023 after announcing unexpected losses for the three months ended March 31 and sales that fell below Wall Street estimates.

The news forced investors to flee, and shares of Under Armor fell 24% on Friday, at one point reaching a 52-week low of $ 10.39.

Also on Friday, rival Adidas said its growth in 2022 will remain low in the projected range due to the “strong impact” of coronavirus-related outages in China. Now this year, Adidas sales in the Greater China region have dropped significantly.

Under Armor CEO Patrick Frisk called the oncoming wind temporary and said the main demand for the brand remains strong. The retailer maintains discipline to make sure he doesn’t order too many items, Frisk told analysts. The risk is that Under Armor may later be forced to dump surplus goods that it does not sell, complicating its profitability.

Here’s how Under Armor did for the three-month period ended March 31, compared to what Wall Street expected based on a poll by Refinitiv analysts:

  • Loss per share: 1 cent adjusted for expected earnings of 6 cents
  • Income: $ 1.3 billion versus the expected $ 1.32 billion

Under Armor reported a net loss for the quarter of $ 59.6 million, or 13 cents a share, compared to net income of $ 77.8 million, or 17 cents a share, a year earlier.

Excluding disposable goods, he lost a penny per share. Analysts were looking for adjusted earnings per share of 6 cents.

CFO David Bergman said the profit margin was affected by increased freight costs, especially sea freight, which turned out to be higher than the company expected. Under Armor also used more air travel to deliver goods from abroad, he said.

Sales rose to $ 1.3 billion from $ 1.26 billion a year earlier. That’s not an estimate of $ 1.32 billion.

In North America, sales rose 4% to $ 841 million. However, its international business grew by only 1% to $ 456 million, down 14% in the Asia-Pacific region, which includes China.

China is not only a growing market for Under Armor to try to win new customers, but is also a major manufacturing hub for much of the sportswear industry. A number of international corporations, including Apple and Estee Lauderthere is warned in recent days that an obstacle from Chinese control of Covid will hit their business.

In the 12 months ended December 31, Under Armor has produced approximately 67% of clothing and accessories in China, Vietnam, Jordan, Malaysia and Cambodia. And almost all of his shoes were made in China, Vietnam and Indonesia, showing annual shows.

In the first quarter of fiscal year 2023, which runs from April 1 to March 31 next year, Under Armor sales were down slightly from the previous year.

Bergman said the first half of the year will be the hardest hit by cancellations and delays in supply chains. Under Armor also expects Covid-19 exposure in China to diminish as the year tightens, he said.

For the full year, Under Armor forecasts earnings of 63 cents to 68 cents per share on an adjusted basis, which is below analysts’ expectations of 86 cents.

Compared to the previous year, sales increased by 5-7%. Analysts expected growth of 5.4%.

Under Armor said the forecast takes into account three percentage points of headwinds due to its decision to cancel some orders to suppliers due to capacity problems and delays in the supply chain.

CEO Frisk said the brand must return to delivering “sustainable, profitable profits” as global supply chain challenges and coronavirus-related complications in China return to normal.

He also teased future projects to increase demand, including a resale platform and a loyalty program that Under Armor plans to test in North America by the end of 2022.

Find the full financial release in Under Armor here.

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