Under Armour’s apparel revenue decreased 2 per cent to $1 billion, footwear revenue increased 14 per cent to $376 million and accessories revenue fell 12 per cent to $111 million.
American brand Under Armour has reported that its revenue was up 2 per cent to $1.6 billion (up 5 per cent currency neutral) in second quarter (Q2) of fiscal 2023 (FY23) ended September 30, 2022, compared to the prior year. Its wholesale revenue increased by 4 per cent to $948 million and direct-to-consumer revenue decreased 4 per cent to $577 million.
The company’s wholesale revenue increased by 4 per cent to $948 million, and direct-to-consumer revenue decreased by 4 per cent to $577 million due to a 9 per cent decline in owned and operated store revenue partially offset by a 4 per cent increase in e-commerce revenue, which represented 36 per cent of the total direct-to-consumer business during the quarter, the company said in a media release.
North American revenue was down 2 per cent compared to the prior year at $1 billion, and international revenue increased by 7 per cent to $547 million (up 16 per cent currency neutral) in Q2 FY23. Within the international business, revenue increased 9 per cent in EMEA (up 20 per cent currency neutral), rose 7 per cent in Asia-Pacific (up 14 per cent currency neutral), and increased 3 per cent in Latin America (up 4 per cent currency neutral).
Gross margin declined 560 basis points to 45.4 per cent in Q2 compared to the prior year, driven primarily by higher promotions, elevated freight expenses related to COVID-19 supply chain impacts, unfavourable channel mix, and the negative impact of changes in foreign currency.
Selling, general and administrative expenses decreased 1 per cent to $594 million, including a $10 million legal expense related to ongoing litigation matters.
The company’s operating income was $119 million, adjusted operating income was $129 million and net Income was $87 million, in the period under review. Excluding a $10 million legal expense related to ongoing litigation matters and a $5 million benefit from a tax valuation allowance release related to prior-period restructuring, adjusted net income was $92 million. Its diluted earnings per share was $0.19 and adjusted diluted earnings per share was $0.20.
The inventory of the brand was up 29 per cent to $1.1 billion. Cash and cash equivalents were $854 million at the end of the quarter, and no borrowings were outstanding under the company’s $1.1 billion revolving credit facility.
“We’re pleased to have delivered second-quarter results that were in line with our expectations,” said Under Armour interim president and CEO Colin Browne. “While we anticipate the immediate macroeconomic backdrop to stay uncertain – we are taking a balanced approach to mitigate near-term pressures while continuing to focus on the long-term strength of our brand.”
Browne continued, “By leaning into these strengths – performance product innovation, deep consumer connections, and empowering athletes – our team is working tirelessly across multiple growth opportunities. From refining our target consumer to young athletes and creating the space necessary to broaden our product aperture – we’re taking action to pivot to the growth we know the Under Armour brand is capable of over the long term.”
For fiscal year 2023, Under Armour’s revenue is expected to grow at a low single-digit percentage rate compared to the previous expectation of 5 to 7 per cent growth due primarily to a more challenging retail environment and additional negative impacts from changes in foreign currency. Currency-neutral revenue is expected to be up at a mid-single-digit percentage rate compared to the previous expectation of 7 to 9 per cent growth.
Gross margin remains unchanged from the previous outlook of a 375 to 425 basis point decline. Selling, general and administrative expenses are expected to be down slightly against the prior year as the company manages costs amid uncertain market conditions.
Operating income is expected to reach $270 to $290 million compared to the previous range of $300 to $325 million. Excluding an expense related to ongoing litigation matters, adjusted operating income is expected to reach $290 to $310 million compared to the previous range of $310 to $335 million.
Diluted earnings per share is expected to be $0.56 to $0.60 compared to the previous expectation of $0.61 to $0.67. Capital expenditures remain unchanged from an expectation of approximately $225 million, the company said in the release.
Fibre2Fashion News Desk (KD)