Under Armour lowers profit outlook amid higher costs

Under Armour has lowered its annual profit forecast, citing surging raw material costs and higher promotions as waning demand has begun to eat into its margins.

Revenue for the sportswear company was flat at £1.07 billion ($1.3 billion), up 2% currency neutral, compared to the prior year.

Wholesale revenue increased 3% to £653 million ($792 million), and direct-to-consumer revenue decreased 7% to £429 million ($521 million), driven by an 8% decline in owned and operated store revenue.

E-commerce revenue declined 6% and represented 39% of the total direct-to-consumer business during the quarter.

Apparel revenue decreased 1% to £715 million ($868 million). Footwear revenue increased 1% to £286 million ($347 million). Accessories revenue decreased 13% to £80 million ($97 million).

Looking forward, the company now expects earnings per share for the full year to come in between 61 cents and 67 cents, down from an earlier guide of between 79 cents and 84 cents. Gross margin is expected to be down 375 to 425 basis points, a worsened outlook from the previous range of 150 to 200 basis points.

Under Armour said the decline in outlook was primarily driven by expected higher promotional activities, channel mix, and additional negative impacts from anticipated changes in foreign currency.

The expense surge comes amid rising prices of raw materials from cotton to resin, COVID-19 flare-ups in manufacturing hub China and the fallout from the Russia-Ukraine war.

Colin Browne, Under Armour Interim President and CEO said: "We delivered our quarter, are holding our full-year revenue outlook, and remain bullish on our brand strength while we navigate the current environment. Our relentless approach of delivering groundbreaking innovation will continue to manifest through 2022 and beyond as we work to unleash the full potential of the Under Armour brand."

"Moving forward, we are digging in to amplify the strengths of our core strategy while creating additional opportunities for athletes to wear UA throughout their day. I have full confidence in the exceptional capabilities of our global team to deliver more pronounced growth and profitability over the long term."