The products are on display at an Under Armor store in New York City on November 4, 2019.
Brendan McDermid | Reuters
Under Armor said revenue fell 41% in the fiscal second quarter on Friday, but overall its results came better as the retailer hoped to boost e-commerce.
The sneaker manufacturer estimated about 80% of the stores where its merchandise could be purchased, including its own shops, had been closed since mid-May due to the coronavirus epidemic.
Selling directly to customers made its sales more profitable and reduced drag on one of the items sold on off-price channels. As a result, its gross margin was up 280 basis points to 49.3%.
BMO Capital Markets analyst Simeon Seagal said in an interview, “While there was a significant reduction in revenue, the company showed incredible potential to increase gross margins. “They are effectively occupying more on less.”
Shares of Armor jumped nearly 12% in primary trading.
Here’s what the retailer expected during the quarter ended June 30, compared to analysts expected by Retainerive:
- Loss per share: 31 cents, adjusted, versus 41 cents loss, expected
- Revenue: $ 707.6 million vs. $ 543.8 million, expected
With the stores reopening, the company said it was “encouraged” by the momentum seen in June and July.
“However, we remain reasonably cautious with respect to the balance of 2020 due to continuing uncertainty related to the dynamics of consumer shopping, the ongoing VVIDs to reduce inventory purchases due to excessive promotional environment and potential activism More aligns with anticipated demand related to the -19 impact, ”Chief Executive Patrick Frisk said in a statement.
Under Armor said its second-quarter net loss rose to $ 182.9 million, or 40 cents per share, from a loss of $ 17.3 million, or 4 cents per share, a year earlier.
The retailer lost 31 cents a share, excluding restructuring fees of $ 39 million. According to Refinitive, less than 41 percent of losses were analysts’ estimates.
Revenue increased to $ 707.6 million from $ 1.19 billion a year earlier. Analysts were expecting revenue of $ 543.8 million.
Within that, apparel sales dropped 42% to $ 426 million, while footwear revenue fell 35% to $ 185 million, and accessories revenue fell 47% to $ 56 million.
Under Armor said it ended the quarter with $ 1.1 billion in cash and cash equivalents.
It said inventions ranged from 24% to $ 1.2 billion.
Earlier this week, the Baltimore-based company said it received a notice of possible enforcement action from the Securities and Exchange Commission concerning the accounting treatment of sales booked between the third quarter of 2015 and the fourth quarter of 2016.
On July 22, in addition to two executives, Under Armor – Kevin Planck, its former CEO and current executive chairman, and David Bergman, its current CFO – received a Wells notice related to a previously disclosed investigation by the SEC, the company said 8-K Filing.
The Wells notice does not mean that the company or authorities have violated the law. However, this indicates that the agency is considering enforcement action. Under Armor said on Monday that it maintains its actions “appropriate”, and that it intends to “work towards resolution of the matter.”
As of Thursday’s market close, Under Armor shares are down nearly 47% this year. The company has a market cap of about $ 5.2 billion.
Get the full earnings press release from Under Armor here.