Under Armour (UAA.N) posted a surprise first-quarter profit on Thursday, benefiting from its efforts to cut inventory and promotions at a time when consumers are picky with what they spend their dollars on.
Inventory dropped 15 per cent to $1.1 billion and the company raised its annual profit forecast, sending its shares up nearly 10 per cent before the bell.
“The company is better situated selling less and charging more. It’s early but the improvement in profitability this quarter is suggesting the first steps of this reset are working,” BMO analyst Simeon Siegel said.
Under Armour is attempting to turn around its business by reducing the pace of promotions, cleaning up its inventory, limiting online discounts and focusing more on profitable items such as men’s apparel.
Those efforts aided in a 110 basis points expansion in gross margin to 47.5 per cent, mainly driven by limited discounting in its direct-to-consumer channels and lower product costs.
“We are encouraged by early progress in our efforts to reconstitute a premium positioning for the Under Armour brand,” CEO Kevin Plank said.
Despite its efforts, quarterly revenue from its biggest North America market declined 14 per cent as inflation stretched customer budget, while revenue from international business fell 2 per cent.
Softer demand also led wholesale retailers to reduce orders, resulting in an 8 per cent fall in Under Armour’s wholesale revenue.
Its first-quarter revenue dropped 10 per cent to $1.18 billion smaller than a nearly 13 per cent decline analysts had anticipated.
On an adjusted basis, it earned 1 cent per share compared with its expectation of an 8 cents to 10 cents loss.
Under Armour expects fiscal 2025 adjusted earnings per share between 19 cents and 22 cents, slightly above its prior expected range of 18 cents to 21 cents.
It now expects a slightly lower decline in North America revenue in the range of 14 per cent to 16 per cent from a prior view of a 15 per cent to 17 per cent drop.
