The store of American multinational clothing brand Under Armor is seen in Hong Kong.
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Under Armor on Wednesday cut its profit forecast for fiscal 2023 as more promotions in its athletic apparel hit the margins.
The company now expects full-year earnings per share to be between 61 cents and 67 cents, down from previous guidance of between 79 cents and 84 cents. Gross margin is expected to fall 375 to 425 basis points, an outlook that worsened from the previous range of 150 to 200 basis points. One basis point is equal to 0.01 percentage point.
However, Under Armour’s fiscal first-quarter results were in line with analysts’ expectations.
Here’s what the company reported compared to what Wall Street expected, based on a survey of analysts by Refinitiv:
- Earnings per share: 3 cents, adjusted, vs. 3 cents expected
- Income: $1.35 billion vs. $1.34 billion expected
The company said revenue was driven in part by higher prices. North American revenue during the period was flat year-over-year at $909 million, while international revenue fell 3.3% to $431 million, trailing an 8% decline in the Asia-Pacific region. On a currency-neutral basis, international revenue rose 1.5%.
Gross margin for the period fell 280 basis points compared to a year ago.
Cost of goods sold increased from the same three months in 2021 to $718.9 million, accounting for 53.3% of net income compared to 50.5% of net income a year ago.
Chief Financial Officer David Bergman said on an earnings call that the company is “not excited to be more promotional,” but defended the discounts given the inflationary environment.
Net income before adjustments was $7.68 million, or 2 cents per share.
Under Armor reported $10 million in legal fees related to ongoing litigation. Last week, the company agreed to settle a lawsuit with UCLA for $67.49 million over a discontinued apparel contract.
The company said it expects litigation costs to continue to weigh on earnings, citing a 2-cent negative impact on full-year EPS.
Kevin Plank, Under Armour’s founder and executive chairman, said Wednesday that the company would choose a new CEO “by the end of the year.” Interim CEO Colin Browne has been in the role since Patrick Frisk resigned on June 1.
