Nov 6 (Reuters) – Under Armour on Thursday flagged weakness across its portfolio, as the athletic apparel maker grapples with a challenging consumer environment and aggressive discounting by competitors clearing inventory.
The company also cut its annual gross margin forecast, saying Middle East-related disruptions had extended beyond its previous expectations, adding to pressure from elevated fuel and freight costs.
Shares of the company, which plunged about 12% premarket, were flat in the morning trading.
Here are some details:
• The company reported declines across all major product categories in the second quarter, led by an about 11% drop in footwear sales, while apparel fell 6% and accessories about 7%.
• It now expects third-quarter revenue to decline about 8% to 9%; analysts expected a fall of about 4%, according to data compiled by LSEG
• It also sees adjusted loss of one to three cents in the quarter, well below expectations of four cent profit
• The company expects annual gross margin to increase 170 to 220 basis points, slower than its prior view of a 220 to 270 basis-point improvement
• Under Armour forecasts low double-digit decline in the third-quarter in North America, a major revenue contributor
• Current traffic and macroeconomic pressures could result in North America declining more than previously anticipated this fiscal year, CFO Reza Talaghani said on a post-earnings call
• Under Armour’s second-quarter revenue and adjusted earnings per share edged past expectations
• “Under Armour is making progress on simplifying the business, cutting costs, and upgrading its products, but there’s a long way to go,” Morningstar analyst David Swartz said, adding that the company’s turnaround remains challenged by weak industry demand, widespread promotional activity and high gas prices
• Under Armour forecast a roughly $45 million impact from the Middle East conflict, up from the prior view of $35 million
(Reporting by Shania S Thomas in Bengaluru; Editing by Shreya Biswas)
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