Under Armour announces financial results

Under Armour, Inc. announced financial results for the third quarter ended 30th September, 2020.

“Our third-quarter results reflect considerably better than expected performance due to higher demand and our strong execution, especially in North America. We believe that the critical mass of our transformational challenges is behind us, and we remain sharply focused on operational improvements and financial discipline to accelerate strategies to create sustainable, long-term growth for the Under Armour brand and our shareholders,” said Under Armour President and CEO Patrik Frisk.

Revenue was flat at $1.4 billion compared to the prior year. Wholesale revenue decreased 7 percent to $830 million and direct-to-consumer revenue increased 17 percent to $540 million, driven by continued strong growth in eCommerce.

North America revenue decreased 5 percent to $963 million and international revenue increased 18 percent to $433 million (up 17 percent currency neutral). Within the international business, revenue increased 31 percent in EMEA (up 26 percent currency neutral), increased 15 percent in Asia-Pacific (up 16 percent currency neutral), and decreased 15 percent in Latin America (down 7 percent currency neutral).

Apparel revenue decreased 6 percent to $927 million. Footwear revenue increased 19 percent to $299 million. Accessories revenue increased 23 percent to $145 million. Gross margin decreased 40 basis points to 47.9 percent compared to the prior year, driven primarily by negative impacts from COVID-19 related discounting and product mix partially offset by supply chain efficiencies and channel mix.

Selling, general & administrative expense was relatively unchanged from the prior year at $554 million. Restructuring and impairment charges were $74 million consisting of $70 million of restructuring and related impairment charges and $4 million from long lived asset impairments. Through the third quarter, the company has recognized $550 million of restructuring and impairment charges consisting of $410 million in restructuring and related impairment charges ($326 million in non-cash and $84 million in cash) and $140 million from impairments of long-lived assets and goodwill.

Operating income was $59 million. Excluding the impact of restructuring and impairment charges, adjusted operating income was $133 million. Net income was $39 million. Adjusted net income was $118 million. Diluted earnings per share was $0.09. Adjusted diluted earnings per share was $0.26. Inventory was up 17 percent to $1.1 billion.

The company ended the third quarter with Cash and Cash Equivalents of $866 million.
No borrowings were outstanding under the company’s $1.1 billion revolving credit facility at the end of the third quarter.

Due to ongoing uncertainty related to COVID-19 and its potential effect on global markets, the company expects material impacts on its business results for the remainder of 2020 and into 2021.

Revenue is expected to be down at a high-teen percentage rate compared to 2019 results, reflecting a low twenties percentage rate decline in North America and a high single-digit percentage rate decline within the international business. For the fourth quarter, the company now expects revenue to be down at a low-teen percentage rate, versus the previous down 20 to 25 percent expectation.

Gross margin is expected to be up 20 to 40 basis points versus 2019 due to channel mix benefits and supply chain efficiencies, offset mainly by discounting related to COVID-19. For the fourth quarter, the company anticipates meaningful gross margin pressure primarily related to expectations around a more promotional environment relative to the prior year.

Operating loss is expected to reach approximately $800 million to $860 million. Excluding the impact of restructuring and impairment charges, adjusted operating loss is expected to reach approximately $140 million to $150 million.

Adjusted interest and other expense net is planned at approximately $55 million. Adjusted diluted loss per share is expected to be in the range of $0.47 to $0.49. Inventory is expected to be up approximately 10 percent at the end of 2020. Capital expenditures are planned at approximately $80 million compared to $144 million in 2019.