Under Armour Q2 mixed as sales continue to fall at home
Under Armour reported mixed second-quarter results amid a year-long sales decline in North America that shows no signs of stopping anytime soon.
The athletic apparel company had a net loss of $17.3 million, or 4 cents per share, in the quarter ended June 30, compared to a loss of $95.5 million, or 21 cents per share, last year. Analysts has expected a loss of 5 cents per share.
Total revenue rose 1% to $ 1.192 billion, missing the $1.199 billion analysts had expected. North America revenue fell 3% to $816 million and the international business increased 12% to $339 million. Wholesale revenue fell 1% to $707 million and direct-to-consumer revenue rose 2% to $423 million, representing 35% of total revenue.
“Revenues in the North American division – which accounts for 68% of all sales – have now been falling for a year,” commented Neil Saunders, managing director, GlobalData Retail. “This quarter’s figures provide little relief, with the pace of decline accelerating. “Fortunately, some of this deterioration is due to a deliberate strategy to preimmunize and rationalize assortments – which has diminished sales in the off-price channel and has reduced the volume of lower-priced items available.”
By category, apparel revenue decreased 1% to $740 million. Footwear revenue increased 5% to $284 million and accessories revenue was unchanged at $106 million.
Under Armour has been challenged on its home turn by increased competition from such rivals as Nike, Adidas and Lululemon. The company is in its third year of a restructuring to stabilize business and reverse a slide in sales. The strategy has focused on the brand’s athletic performance roots and on product innovation. But Saunders said the brand has more work to do.
“Our data show the company’s ratings on measures like quality, performance and design are still below Nike’s and a long way below more focused players like Lululemon,” he said. “There has been modest improvement over the past year, but not to any significant degree.”
The analyst added that Under Armour’s brand equity with female consumers is a long way behind rivals and that it needs to shed “the dark, masculine image it has cultivated over a long period of time.”
“This stands in direct contrast to Nike, which has a much better gender balance, and to Lululemon which has successfully developed a comprehensive range for men alongside its core offering for women,” Saunders said. (For more analysis, click here.)
For fiscal 2019, Under Armour expects earnings per share of 33 cents to 34 cents and revenue growth of about 3% to 4%, reflecting a “slight decline” in North America and a low to mid-teen percentage rate increase in the international business. Analysts were looking for earnings per share of 35 cents and revenue growth of about 3.5%.
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