Under Armour (NYSE: UA) shares shot up 23.33% on Thursday as the sportswear maker raised its annual profit forecast, betting on lower input costs and cost-saving strategies such as fewer discounts at its own stores and website.
Following several quarters of poor results, company founder Kevin Plank returned as CEO to reset the business with a plan to boost profit by reducing headcount and cutting down on inventory of some products.
Under Armour (NYSE: UA) and Nike (NYSE: NKE) are trying to revamp their businesses to galvanize demand and win back market share from newer, more innovative brands such as Roger Federer-backed On and Deckers Outdoor’s Hoka.
Under Plank, the company also aims to sell apparel and footwear at full prices in an attempt to “clean up” the missteps from heavily discounting over the last couple of years.
Full-price sales accounted for roughly half of all e-commerce revenue in the second quarter, compared with 30% just a year ago, Plank said on a post-earnings call.
That, coupled with the lower discounts, boosted its gross margin by 200 basis points to 49.8%.
“… It takes more than the right pricing strategy to succeed in the athleisure market. Creating products that consumers are willing to pay top dollar for and swerving the need for sales stickers is the best way to impress investors,” said Danni Hewson, head of financial analysis at AJ Bell.
Under Armour (NYSE: UA) now expects an annual adjusted per-share profit of between 24 cents and 27 cents, compared with its earlier forecast of 19 cents to 21 cents.
Excluding items, it earned 30 cents per share in the quarter, beating estimates of 20 cents
“For some time, we have believed Under Amour would be best situated to improve its business by focusing on health overgrowth,” said BMO Capital Markets analyst Simeon Siegel.
Its second-quarter net sales fell 10.7% to $1.40 billion, compared with analysts’ expectations for an 11.6% fall to $1.39 billion, according to data compiled by LSEG.
(Source: Reuters)
