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Under Armour lowers FY17 sales and earnings outlook

By Prachi Singh

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Business

Under Armour’s revenue for the third quarter was down 5 percent to 1.4 billion dollars. The company said, during the third quarter, operational challenges due to the implementation of the company's enterprise resource planning system and related service levels along with lower North American demand negatively impacted revenue. Revenue to wholesale customers declined 13 percent to 880 million dollars and direct-to-consumer revenue was up 15 percent to 468 million dollars.

"While our international business continues to deliver against our ambition of building a global brand, operational challenges and lower demand in North America resulted in third quarter revenue that was below our expectations," said Under Armour Chairman and CEO Kevin Plank in a statement, adding, "Based on these issues in our largest market, we believe it is prudent to reduce our sales and earnings outlook for the remainder of 2017."

North American business proves challenging for Under Armour

The company added that North America challenges impacted results with revenue down 12 percent, while strong international momentum continued with revenue up 35 percent and 34 percent currency neutral, representing 22 percent of total revenue. Within the international business, revenue in EMEA was up 22 percent or 20 percent currency neutral, up 52 percent in Asia-Pacific or 53 percent currency neutral and up 33 percent in Latin America or 27 percent currency neutral).

Apparel revenue decreased 8 percent to 939 million dollars, as Under Armour said, growth in golf and sportstyle was more than offset by declines in outdoor, women's training and youth. Footwear revenue was up 2 percent to 285 million dollars, driven by strength in running and outdoor, offset by basketball and youth. Accessories revenue increased 1 percent to 123 million dollars led by golf and men's training, tempered by a decline in outdoor.

Gross margin declined 160 basis points to 45.9 percent , while adjusted gross margin, which excludes a 4 million dollars impact from restructuring efforts, was 46.2 percent, a decrease of 130 basis points compared to the prior year.

Operating income was 62 million dollars and adjusted operating income was 151 million dollars. Net income was 54 million dollars in the third quarter, while adjusted net income was 100 million dollars and diluted earnings per share were 0.12 dollar and adjusted diluted earnings per share was 0.22 dollar.

Under Armour downgrades fiscal 2017 outlook

Based on the third quarter performance, the company’s net revenue is expected to be up at a low single-digit percentage rate reflecting lower North American demand and operational challenges due to the implementation of the company's enterprise resource planning system and related service levels.

Gross margin is expected to be down approximately 220 basis points compared to 46.4 percent in 2016 as benefits from product costs and channel mix are more than offset by increased efforts to manage inventory within a highly promotional environment, impacts from the restructuring plan and increasing regional mix. Adjusted gross margin is expected to be down approximately 190 basis points compared to 46.4 percent in 2016.

Operating income is expected to be approximately 0 to 10 million dollars, while adjusted operating income is expected to reach 140 million dollars to 150 million dollars. Adjusted diluted earnings per share of 0.18 dollar to 0.20 dollar.

Picture:Under Armour website

Under Armour