The products are on display at an Under Armor store in New York City, November 4, 2019.
Brendan McDermid | Reuters
Under Armor said on Friday its second-quarter fiscal revenue fell 41%, but overall its results came out better than the seller expected thanks to an e-commerce boost.
The sneaker manufacturer estimated approximately 80% of stores where its goods could be purchased, including its own stores, were closed due to the coronavirus pandemic by mid-May.
Direct selling to customers made its sales more profitable and there was no less crawling of items sold on off-priced channels. As a result, its gross margins strengthened 280 basis points to 49.3%.
“Although revenue was understandably high, the company showed tremendous ability to raise gross margins,”; BMO Capital Markets analyst Simeon Siegel said in an interview. “They are catching more effectively.”
Armor shares jumped about 12% in preset trading.
Here is how the retailer reacted during the quarter ended June 30 compared to what analysts expected from Refinitiv:
- Loss per share: 31 cents, adjusted, versus a loss of 41 cents, expected
- Revenue: $ 707.6 million versus $ 543.8 million, expected
With the stores reopening, the company said it was “encouraged” by the moment it was looking at June and July.
“However, we remain properly cautious about the 2020 balance sheet due to ongoing uncertainty about the dynamics of consumer purchases, the potential for a highly promotional environment and proactive decisions to reduce inventory purchases to ‘was more in line with the projected demand regarding the continuation of COVID-19 impacts,’ Chief Executive Patrick Frisk said in a statement.
Sub Armor said its second-quarter net loss expanded to $ 182.9 million, or 40 cents a share, from a loss of $ 17.3 million, or 4 cents a share, a year earlier.
Excluding a $ 39 million restructuring fee, the retailer lost 31 cents a share. That was less than analysts’ forecast of a 41 percent loss, according to Refinitiv.
Revenue fell to $ 707.6 million from $ 1.19 billion a year earlier. Analysts expected revenue of $ 543.8 million.
Within that, clothing sales fell 42%, reaching $ 426 million, while footwear revenue fell 35% to $ 185 million, and accessory revenue fell 47% to $ 56 million.
Sub Armor said the quarter ended with $ 1.1 billion in cash and cash equivalents.
She said inventories had risen 24% to $ 1.2 billion.
Earlier this week, the Baltimore-based company said it received notice of a possible enforcement action by the Insurance and Exchanges Commission regarding the accounting treatment of sales it reserved between the third quarter of 2015 and the fourth quarter of 2016.
On July 22, Under Armor in addition to two executives – Kevin Plank, its former CEO and current CEO, and David Bergman, his current CFO – received Wells announcements about an investigation previously uncovered by The SEC, the company said in an 8-K Schedule.
A Welsh notice does not necessarily mean that the company or executives violated the law. However, it indicates that the agency is considering an enforcement action. Sub Armor said Monday that he claims her actions were “appropriate”, and he intends to “work for a solution to this issue”.
While close to Thursday’s market, Under Armor shares have fallen about 47% this year. The company has a market cap of about $ 5.2 billion.
Find the full income press release from Under Armor here.