Under Armour Misses Q4 Targets And Delivers Weak Outlook

Article From：SGB MEDIA

 

Under Armour Inc. reported an unexpected fourth-quarter loss and missed Wall Street estimates for its revenues. The company also warned of soft 2020 results and said it’s considering another massive restructuring initiative to rebalance its cost base.

 

“Under Armour is an operationally better company following our transformation over the past few years, with a clearly defined and focused strategy, enhanced go-to-market process, cleaner inventories and a stronger balance sheet,” said Under Armour President and CEO Patrik Frisk. “However, ongoing demand challenges and the need to drive greater efficiencies in our business requires us to further prioritize our investments to put our company in the best position possible to achieve sustainable, profitable growth over the long-term.”

 

Fourth Quarter 2019 Review

 

Revenue was up 4 percent to $1.4 billion (up 4 percent currency neutral).

Gross margin increased 230 basis points to 47.3 percent compared to the prior year driven primarily by pricing including lower discounts to our wholesale partners, channel mix and supply chain initiatives.

Selling, general & administrative expenses increased 3 percent to $607 million, or 42.1 percent of revenue.

Operating income was $74 million.

Net loss was $15 million or 3 cents per diluted loss per share. The loss was inclusive of a $23 million tax expense, which had a 5 cents per negative earnings per share impact related to the recording of valuation allowances against certain of the company’s U.S. state deferred tax assets. The loss also reflected a $39 million impairment charge, which had an 8 cents per negative earnings per share impact related to the company’s equity interest investment in its Japan licensee.

Cash and cash equivalents increased 41 percent to $788 million.

Inventory decreased 12 percent to $892 million.

Total long-term debt decreased 19 percent to $593 million.

The loss of 3 cents a share was lower than Wall Street’s consensus estimate of earnings of 10 cents per share. Revenues of $1.4 billion were also short of Wall Street’s consensus estimate of $1.47 billion.

 

By category, footwear saw the strongest growth, climbing 10.3 percent to $259.3 million. Apparel revenues inched up 0.2 percent to $970.3 million and accessories added 1.6 percent to $109.9 million. Licensing revenues climbed 35.5 percent to $62.2 million.

 

All regions showed gains and all showed improved profitability except for the EMEA region.

 

In North America, sales grew 1.9 percent to $983.0 million and also advanced 1.9 percent on a currency-neutral basis. Operating profits improved 7.1 percent to $196.7 million.

 

Overall international growth was ahead 6.6 percent on a reported and 8.0 percent on a currency-neutral basis.

 

In the EMEA region, revenues rose 2.2 percent to $180.7 million and increased 3.5 percent on a currency-neutral basis. Operating profits were down 27.4 percent to $9.0 million.

 

Asia-Pacific revenues climbed 9.8 percent to $183.0 million and increased 11.1 percent on a currency-neutral basis. Operating income increased 9.8 percent to $23.5 million.

 

In the Latin America region, sales ran up 11.9 percent to $55.0 million and jumped 13.8 percent on a currency-neutral basis. The region posted operating earnings of $857,000 against a loss of $6.5 million a year ago.

 

In the Connected Fitness segment, revenues gained 15.6 percent to $35.0 million. Connected Fitness registered operating earnings of $9.04 million against an operating loss of $1.31 million.

 

Full Year 2019 Review

 

Revenue was up 1 percent to $5.3 billion (up 3 percent currency neutral).

Gross margin was 46.9 percent, a 180-basis point improvement from 45.1 percent in the prior year driven predominantly by supply chain initiatives, channel mix and prior period restructuring charges.

Selling, general & administrative expenses increased 2 percent to $2.2 billion, or 42.4 percent of revenue.