Footwear and athletic apparel manufacturer Under Armour Inc (NYSE: UAA) reported better-than-anticipated fiscal 2021 fourth-quarter revenues and earnings on Friday. However, the company issued a negative view about the gross margins for the transition quarter ending March 2022. This triggered a sell-off that took the stock price to $17.51, down 12.49% or $2.50 from the prior close.
The Baltimore, Maryland-based company reported fourth-quarter revenues of $1.529 billion, an increase of 9.30% from $1.403 billion in the similar period last year.
For the quarter ended December 31, 2021, Under Armour reported a net income of $109.66 million, or $0.23 per share, compared with $184.45 million, or $0.40 a share, in the quarter ended December 31, 2020.
Excluding restructuring and impairment charges, amortization of debt discount, loss on extinguishment of convertible senior notes, earn-out recorded in connection with the sale of the MyFitnessPal platform, and provision for income taxes, 4Q 2021 adjusted earnings was $67.483 billion, or $0.14 per share.
Analysts polled by Refinitiv had anticipated the company to report earnings of $0.07 per share on revenues of $1.47 billion for Q4 2021.
Commenting on the data, Under Armour President and CEO Patrik Frisk, said: “The final quarter of 2021 demonstrated the power and consistency of Under Armour’s strategic playbook, which allowed us to capitalize on improving brand strength and consumer demand.”
Segment-wise,
- Apparel revenues grew by 18% y-o-y to $1.098 billion.
- Footwear revenues were $282.72 million, an increase of 17.40% from last year.
- Accessories revenues fell by 26.50% y-o-y to $106.65 million.
- Licensing revenues were $36.606 million, down 32.90% on a y-o-y basis.
Region-wise,
- North America revenues surged 15.10% y-o-y to $1.063 billion.
- EMEA revenues were $200.20 million, an increase of 24.20% from last year.
- Asia-Pacific revenues decreased 5.90% y-o-y to $217.22 million.
- Latin America revenues declined 21.70% to $44.045 million.
E-commerce sales increased 4% on a y-o-y basis, reflecting 42% of Under Armour’s direct-to-consumer sales with the rest of the sales generated by physical stores.
While reporting 4Q 2021 results, the company issued an earnings outlook for the current quarter ending March 31, 2022. Furthermore, Under Armour lifted the quarterly revenue growth view.
However, the company stated that its gross margins would decline by 2% in the March 2022 quarter, primarily due to supply chain issues.
Under Armour also cautioned that the steep rise in freight costs will have a negative impact on profits in the months ahead. The company had earlier stated that it is shelling out more for air cargo to receive goods from contract locations in other countries. Now, seaway shipping has also become costlier.
David Bergman, CFO of Under Armour, described the difficulties as a “temporary speed bump.” Following the release of quarterly results, the company’s CEO, Kevin Plank, stated that the company would stay vigilant and flexible until the logistic bottlenecks and backlogs diminish.
The company’s objective is to make the consumers regard Under Armour as a high-end label, in the likes of Nike and Lululemon, as it concentrates on top wholesale associates such as Kohl’s and Dick’s Sporting Goods.
Furthermore, as per February 2021 announcement, Under Armour will start using March 31 as the end of the fiscal year, instead of December 31. The change to FY 20223 will start on April 1 after the end of the January-March 2022 transition period. Therefore, the company will not have a 2022 fiscal year.
For the quarter ending March 2022, Under Armour forecasts earnings of between $0.02 and $0.03 per share. Revenues are anticipated to rise at a mid-single-digit rate compared with an earlier forecast for a low single-digit rate rise.
On average, Wall Street analysts anticipate the company to post earnings of $0.14 per share on revenues of $1.31 billion.
Under Armour prefers to hold on until the end of May before releasing a more specific outlook for FY 2023.
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