Stocks of Under Armour Surge on Q1 Top and Bottom-line Beats, Raised Outlook

Under Armour Inc. saw its stock surge by 10.7% in premarket trading on Thursday after the athletic apparel company exceeded Wall Street's expectations for both revenue and earnings in its first-quarter results. Additionally, the company raised its earnings outlook, adding to investor optimism.

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The Baltimore-based company reported a first-quarter net loss of $305 million, or a loss of 70 cents per share, compared to a net income of $10 million, or earnings of 2 cents per share, in the same quarter the previous year. However, on an adjusted basis, Under Armour managed to earn 1 cent per share. This performance surpassed the expectations of analysts surveyed by FactSet, who had anticipated a loss of 8 cents per share.

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Revenue for the quarter came in at $1.184 billion, a decline from $1.317 billion in the same period last year. Despite the year-over-year drop, the revenue figure was above the FactSet consensus estimate of $1.144 billion. The company’s North American revenue fell by 14% year-over-year, landing at $709 million, while international revenue decreased by 2% to $473 million. Regionally, revenue in the Asia-Pacific area dropped by 10%, the Europe, Middle East, and Africa (EMEA) region remained flat, and Latin America saw a 16% increase.

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The company's gross margin improved by 110 basis points, reaching 47.5%. Under Armour attributed this increase primarily to reduced discounting within its direct-to-consumer business and lower product costs. However, this was partly offset by negative impacts from foreign currency fluctuations, as well as challenges related to channel and regional sales mix, and the timing of supply chain benefits from the previous year.

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Under Armour also announced an updated fiscal 2025 outlook, reflecting the company's ongoing restructuring efforts, which were initially unveiled in May. The company now anticipates adjusted earnings per share (EPS) in the range of 19 cents to 22 cents, slightly higher than its previous guidance of 18 cents to 21 cents per share. Analysts polled by FactSet had been expecting earnings of 21 cents per share.

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Kevin Plank, Under Armour’s CEO and founder who returned to lead the company earlier this year, expressed confidence in the company's current direction. In a statement, he noted that Under Armour now has the "strongest product organization" it has seen in many years, signaling a renewed focus on product development and innovation.

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As part of its fiscal 2025 outlook, Under Armour expects its overall revenue to decline by a low double-digit percentage, which includes a projected 14% to 16% drop in North American revenue as the company continues its business reset. This marks a slight improvement from the previous forecast of a 15% to 17% decline in North America.

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Despite Thursday's stock jump, Under Armour shares have struggled in 2024, with the stock down 24.9% year-to-date. This decline contrasts sharply with the broader market performance, as the S&P 500 index has gained 9% over the same period.

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Under Armour's recent performance has been closely watched by investors and analysts, particularly following the return of founder Kevin Plank. His re-engagement with the company has been seen as a critical move to stabilize and refocus the brand, especially in light of the challenges the company has faced in recent years. The restructuring efforts, along with Plank's leadership, are part of a broader strategy to rejuvenate the brand, address operational inefficiencies, and restore investor confidence.

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The company's ability to beat expectations and slightly improve its earnings outlook has provided some much-needed positive momentum. However, with significant challenges still ahead, including the ongoing reset of its North American business and a broader revenue decline anticipated for fiscal 2025, Under Armour will need to continue its focus on strategic execution and product innovation to navigate the difficult landscape and regain its footing in the competitive athletic apparel market.

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