Products are displayed in an Under Armour store in New York City, November 4, 2019.
Brendan McDermid | Reuters
Under Armour said Friday its fiscal second-quarter revenue fell 41%, but overall its results came in better than the retailer was expecting thanks to an e-commerce boost.
The sneaker maker estimated roughly 80% of stores where its merchandise can be purchased, including its own shops, were closed due to the coronavirus pandemic through mid-May.
Selling directly to customers made its sales more profitable and there was less of a drag from items being sold at off-price channels. As a result, its gross margins strengthened 280 basis points to 49.3%.
“Although revenues were understandably down, the company showed an incredible ability to raise gross margins,” BMO Capital Markets analyst Simeon Siegel said in an interview. “They’re effectively capturing more on less.”
Under Armour shares jumped about 12% in premarket trading.
Here’s how the retailer did during the quarter ended June 30 compared with what analysts survyed by Refinitiv were expecting:
- Loss per share: 31 cents, adjusted, versus a loss of 41 cents, expected
- Revenue: $707.6 million versus $543.8 million, expected
With stores reopening, the company said it was “encouraged” by the momentum it was seeing in June and July.
“However, we remain appropriately cautious with respect to the balance of 2020 due to continued uncertainty related to consumer shopping dynamics, the potential for a highly promotional environment and proactive decisions to reduce inventory purchases to be more aligned with anticipated demand related to ongoing COVID-19 impacts,” Chief Executive Patrik Frisk said in a statement.
Under Armour said its second-quarter net loss widened to $182.9 million, or 40 cents per share, from a loss of $17.3 million, or 4 cents a share, a year earlier.
Excluding a restructuring charge of $39 million, the retailer lost 31 cents a share. That was less than the 41-cent loss analysts were predicting, according to Refinitiv.
Revenue fell to $707.6 million from $1.19 billion a year ago. Analysts expected revenue of $543.8 million.
Within that, apparel sales were down 42%, amounting to $426 million, while footwear revenue dropped 35% to $185 million, and accessories revenue fell 47% to $56 million.
Under Armour said it ended the quarter with cash and cash equivalents on hand of $1.1 billion.
It said inventories were up 24% to $1.2 billion.
Earlier this week, the Baltimore-based company said it received notice of a possible enforcement action from the Securities and Exchange Commission related to the accounting treatment of sales it booked between the third quarter of 2015 and the fourth quarter of 2016.
On July 22, Under Armour in addition to two executives — Kevin Plank, its former CEO and current executive chairman, and David Bergman, its current CFO — received the Wells notices related to a previously disclosed probe by the SEC, the company said in an 8-K filing.
A Wells notice doesn’t necessarily mean the company or the executives violated the law. However, it does indicate the agency is considering an enforcement action. Under Armour said Monday that it maintains its actions were “appropriate,” and it intends “to work toward a resolution of this matter.”
As of Thursday’s market close, Under Armour shares are down about 47% this year. The company has a market cap of about $5.2 billion.